Power Off ! India Off ?

This is the story of one of the biggest IPO… Yes the Reliance Power which was hyped too much just before its debut on BSE. The Rs 11,700-crore IPO, the country’s biggest ever so far, had set a few records as far as bids, number of applications and opening day gains were concerned. The IPO was oversubscribed 70 times ! Thousands of retail investors from across the country and elsewhere subscribed to the Reliance Power IPO hoping to book quick profits. Over 2 lakh DeMAT accounts were opened in a single day, and even a layman who had no idea about the stock market was desperate to get his hands on this stock.

 But their dreams and hopes shattered soon after the listing happened on Monday 11th Feb 2008. While the issue price was Rs. 450, it opened at Rs. 530 but declined soon after closing at Rs.372 leaving lakhs of people in a state of disbelief.

I am not a regular investor in the stock market. There is always uncertainity in the market and that is what excites me the most. Things that are monotonous and predictable becmoe boring in the long run. But too much excitement sometimes results in shocks .

The biggest losers in the market are the people who expect big short term gains. The same thing happend in the case of Reliance Power IPO. People who took short term loans (paying interests as high as 20 %), people who withdrew cash from small cap, mid cap stocks to invest in the IPO were doomed.

 So lessons learnt ? Always expect gains in the long run. This will hold good with reliance power IPO as well. May be in a span of 3 to 4 years, the IPO returns could be very good.