Indian Energy Exchange 30% Returns in 1 Week

In the last 1 week, the Indian Energy Exchange (IEX) has delivered returns of around 33% and has been crossing its mark of 52-Week High every day. So, let’s discuss what is going on with this stupendous rally in the stock price of IEX in the last week.

Introduction:

Major Reasons:

1) Increase in Prices:

• The Major reason behind the rally in the stock price of IEX is on account of rising in the price of power (spot prices) that has increased recently in the last 1-1.5 months due to normalcy in the economy.
• This normalcy has led to a rise in the power demand as well.
• The Spot Prices in the exchange went up almost high levels of Rs. 20 per unit. Currently, it was hovering around Rs.8 per unit, which is also on the higher side.
• Looking at these higher price levels and the sustainability of the high prices in the future, the Government concentrated on the supply side to reduce the impact in long term. Further which also resulted in a rise in demand for coal as well. Currently, Thermal Power Plants majorly produce electricity in the country.
• With the rise in demand, there is a shortage of supply of coal as well where the Government has allowed the 2 Big Power Plants- Tata Power and Adani Power to sell their electricity directly to exchanges.
• These companies are not using up to their full capacity because they mostly use imported coal, which supply has been affected from the last 2 years due to some regulations of the countries which ultimately led to rise in prices.
• This will allow the companies to bypass the power purchasing agreement to Indian Energy Exchange.

2) F&O Segment:

• IEX has recently made its debut into the F&O segment which might also lead to a rise in stock volume.

3) Normalcy in Economy:

• With increasing normalcy in the economy and the activity, the volume traded in the exchanges in August 2021 is the highest ever for the company.
• The Volume traded in August 2021 is 70% higher than the volume traded in August 2020.

Conclusion:

The thought process with which Indian Energy Exchange (IEX) was established is going in the right direction. It seems that IEX will only handle the exchange system of the electricity produced in the country and also work in price discovery. IEX is currently having a 95% market share in Power Exchange and has great earning potential in the future. An investor should closely watch this stock and keep this on their radar but should invest post proper research and study.