IEX stock: Covid-batch multibagger in trouble amid downgrades. What’s the best trading strategy?
Synopsis
Indian Energy Exchange (IEX) stock hit a two-year low of Rs 116 on BSE due to downgrades by brokerages after the power ministry announced the introduction of a market coupling method for spot power trading. The market coupling may damage IEX's "moat" and allow other exchanges to cut into its market share over time, leading to volume growth threat. Nuvama and Antique Stock Broking downgraded the stock to sell.
"Currently, IEX is the most trusted platform for electricity spot price determination in India, which is its business moat. However, introduction of a full-fledged market coupler implies an independent third-party will collate all buy/sell bids and derive a uniform market price across all exchanges," domestic brokerage firm Nuvama said.
Like Nuvama, Antique Stock Broking too has downgraded the stock to sell saying that incentives by competitor exchanges like HPX and PXIL can eat into volume growth.
Independent market advisor Sandip Sabharwal said people should avoid this stock because the performance of the stock always used to pick up during summer when the electricity shortage rates go up and then cool off. "So in any case, it is a cyclical stock. And on top of that, if you have government intervention, then obviously the story becomes more sour," he said.
Nuvama has factored in a volume CAGR of around 16% over FY24–30E. “There are near-term headwinds from implementation of market coupling, high power price-driven shift in power volumes away from spot market to longer-duration instruments and rising competition,” Nuvama’s Subhadip Mitra said.
Trading strategy
Stocks Recommendations
“The journey from here won't be easy for bulls since the trend is really strong. Still we expect some pullback in the coming sessions but that too might get restricted towards Rs 135-145. Overall, the range seems to be Rs 145-110 for the next few weeks,” said Mehul Kothari, AVP - Technical Research, Anand Rathi Shares and Stock Brokers.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)