Investors relied on Reliance Power, only to fall

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Investors relied on Reliance Power, only to fall

Was there a hidden hand behind the sharp fall in the Reliance Power scrip after listing? This question is being asked as there are rumours that a mutual fund connected with the group made large-scale sales on the listing day. Why?

CJ: Dipayan Mazumdar

Thu, Feb 14, 2008 10:28:31 IST

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Indian Stock Market :

ACCORDING TO some brokers, a mutual fund connected with the company sold nearly 40,00,000 shares on major stock exchanges. This created panic and led to the fall. Such a fall upon listing is certainly unprecedented and needs to be looked into. It may be mentioned that the Anil Dhirubhai Ambani Group is one of the biggest bull operators in the Indian stock market.

It is clear that the gray market’s expectation of listing at the Rs 900 level was unrealistic in view of the rapid fall in international markets. Does it mean that the promoter group joined the party and brought down the valuation? Since a large number of investors have suffered, it is felt there is a need for inquiry by SEBI. This single episode can have long-term implications for the market. This is also necessary to solve the puzzle, which has surprised even long-term market watchers.

One of the possible reasons bandied about is that markets across the globe had gone down by more than 20-30 per cent between the date of the issue and the date of listing. If the promoters had tried to maintain prices at the promised Rs 900-1000 level during the pre-IPO (Initial Public Offer) phase, they would have incurred a huge loss and therefore may have decided to off-load heavily to bring down the price of the shares.

Only a thorough and transparent investigation can solve this puzzle, which has confounded several pundits and left millions of investors on the verge of bankruptcy. The anger of investors, it is believed, would lead them to suspect government complicity in the matter. They may also suspect that the government machinery desired to create problems for the ruling coalition, with general elections round the corner. The caucus in the ruling party and the opposition parties, which helped the company come out with the public issue, would like to believe that one year is a long time and public memory is short.

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