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Tuesday, February 26, 2008


The Boards of both banks, HDFC and Centurion Bank of Punjab, have okayed a swap ratio of 1 share of HDFC Bank for every 29 shares of CboP, reports CNBC-TV18.
The merger ratio has come in favour of HDFC Bank at current market price.
HDFC Bank will make a preferential issue to HDFC after the merger to maintain 23.28% stake. The merger values CBoP at Rs 50.80 per share.

Visitors to my site may recall that in response to numerous recent queries about CBOP when it was trading above 70, I had given a SELL call on it. Today's closing price on the BSE was 48.25. My call stands vindicated.


Sunday, February 24, 2008

Reliance Power Bonus ratio is 3:5

Reliance Power has today declared a Bonus issue in the ratio of 3:5 , which means 3 bonus shares for every 5 held. This bonus issue is only for Non-Promoters. Anil Ambani's personal stake will come down from 45% to 40%. This would bring down the cost price of retail investors in the Rel Power IPO to 269 and for others to 281. But Ex-Bonus, the price is expected to go down to adjust accordingly.


Sunday, February 17, 2008

Reliance Power to issue Bonus Shares

In a move to compensate the retail investors who burnt their fingers in the Reliance Power IPO, Anil Ambani has announced a Bonus Issue. A board meeting will be held on the 24th Feb to discuss the Bonus ratio. Will this lift the share and the rest of the market tomorrow? We'll see.

There is a buzz in the market that a tussle is going on between the estranged Ambani Bros. for the title of the richest man in India, and there are vested interests involved in pushing & pulling the Reliance Power share price. The announcement of a bonus issue could be a smart move by Anil to salvage some market cap of the ADA group companies which have taken a dent after the Reliance Power listing price fiasco. He has two more IPOs lined up and this move is to resurrect his sagging goodwill among the Indian investors after the Rel Power let down.

It remains to be seen whether we'll see the start of a pre-budget rally next week. The global markets, led by the US markets, are still in a turmoil. If there is some semblance of stability in the global markets it would help the Indian market to do its pre-budget jig.


Monday, February 11, 2008


The worst fears of the market have come true. In my last blog, I mentioned that if Reliance Power lists below its issue price, it will take the entire market down with it. That is exactly what happened today. The bell has tolled. Not only has the Reliance Power stock opened below its issue price, it has closed at a dismal Rs. 375.

Having said that, this current crash in the market presents a good opportunity to buy select good value stocks at prices you could only dream of till a couple of months back. Gems like JKLAKSHMI CEMENT, for example, are now available at throwaway prices. Long term investors can build their portfolios now.


Sunday, February 10, 2008

Reliance Power IPO Listing : The Acid Test

The younger of the Ambani Bros. will ring the BSE bell tomorrow morning. But for whom the bell tolls? That is the big question. If the bears are able to hammer the price below or even close to the issue price then the bell will toll for the market. But I don't think that will happen. Even though the grey market premium, which started at 450-500 rupees when the issue had opened for subscription, has almost diminished to zero, I expect the stock to touch 700 at some point in time during the day tomorrow.

Keeping aside the Reliance Power listing, the markets are still rattled by the recession in the US. The US market is pulling down the whole world's markets with it. But that said, the Indian markets are still cushioned by the robust domestic growth and should perform better than the rest of the world over a one year period. The budget is also round the corner and a pre-budget rally is also expected. Such crashes, as the one we saw on Black Monday, can be expected to happen at least once a year and present a good opportunity to cherry pick at lower levels. Even at the beginning of the year I had predicted a big correction around the end of January, which came two weeks earlier than expected.

So what should be the strategy of a prudent investor now? Firstly, I would use any rally in the market fancied stocks which are quoting at PE ratios of anything between 50 - 100 to exit those stocks. Such high valuations are not sustainable in the long run. In these uncertain times I would rather play safe and invest in stocks which I would be comfortable holding for a minimum of a one year time frame. If you are a short term or day trader, then these are very difficult times for you. Simply because the volatility is too high. Markets are so choppy right now that you can get chopped both ways if you get it wrong.

Here's hoping that a pre-budget rally starts soon.