IEX shares plunge 15% after CERC approves 'arket coupling' norms.

IEX shares fell 15% on Thursday after CERC approved "market coupling" norms with the Day Ahead Market. The stock has corrected 31% from its 52-week high and hit a 52-week low earlier in March. Market coupling will shift volumes to other competing exchanges, denting growth prospects of IEX.

Indian Energy Exchange (IEX) shares fell 15% on Thursday, July 24, following the Central Electricity Regulatory Commission's (CERC) approval of market coupling norms with the Day Ahead Market (DAM). The decision, announced late Wednesday, has significant implications for IEX's market operations and trade volumes.

The CERC's order, released just hours before IEX's Q1FY26 earnings, marks the beginning of a phased implementation of market coupling. The first phase, scheduled for January 2026, will involve coupling the DAM operated by various power exchanges using a 'round-robin' mode. This move aims to unify price discovery across power exchanges, potentially impacting IEX's market operations and trade volumes [1].

Market coupling is a mechanism used in electricity markets to pool bids from multiple power exchanges and clear them centrally, aiming to achieve price convergence across different regions and platforms. The CERC's decision follows months of deliberations with Grid-India and various power sector stakeholders, with the objective of enhancing transparency, improving efficiency, and ensuring better price discovery [1].

The decision to implement market coupling has been seen as a negative development by investors, as it could potentially shift volumes to competitive exchanges. Currently, IEX holds a significant market share of nearly 85% in the spot market. The introduction of market coupling could erode this market share, denting IEX's growth prospects [2].

IEX's shares have corrected 31% from their 52-week high and hit a 52-week low earlier in March. The stock opened 20% lower on Thursday, July 24, at ₹150.3, remaining flat in the last one month. The stock is also in the F&O ban today, which means no new positions can be created in the stock [2].

While the CERC's decision has been met with negative market reactions, some analysts remain optimistic about IEX's long-term prospects. Stifel analyst Nathan Jones has updated his stance on IEX, maintaining a "Buy" rating while raising the stock's price target to $238.00, up from $208.00. This reflects a 14.42% increase and indicates a positive outlook for the stock [3].

The average target price for IEX, based on the consensus of 12 analysts, is $212.20, with a high estimate of $238.00 and a low estimate of $180.00. The average brokerage recommendation is "Outperform," suggesting confidence in IEX's potential performance [3].

Despite the short-term impact of the CERC's decision, investors should closely monitor IEX's Q1FY26 earnings, scheduled for release later today, for further insights into the company's operational preparedness and growth prospects.

References:
[1] https://m.economictimes.com/markets/stocks/news/iex-shares-hit-10-lower-circuit-after-cerc-nod-for-market-coupling-ahead-of-q1-results/articleshow/122871602.cms
[2] https://www.cnbctv18.com/market/iex-share-price-market-coupling-cerc-approval-timeline-impact-moat-market-share-competition-returns-19642424.htm
[3] https://www.gurufocus.com/news/2990589/idex-iex-stock-sees-price-target-increase-by-stifel-analyst-iex-stock-news