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.

Cheers!