The darkness after the Power Failure

Their is darkness in the lives of people who believed in 'Reliance Power' story. But their is always light at the end of the tunnel. But this tunnel is so long that the light is not visible in the near future. Those of you who have made the mistake of applying for the Reliance Power shares must realise that it was a bad investment decision. But still you can rectify this mistake by booking partial loss. The company is not likely to generate any power before 2010 and is unlikely to generate profits before 2012, so stay invested if you can for the next 4-5 years or quit at a price close to Rs.400. The grey market operators are likely to jack up the price close to Rs.400 when the market revives, it will be a prudent time to quit at that time, and invest in better power scrips like NTPC, CESC. Based on fundamentals R-Power does not even merit a price of Rs.300 currently.
However, there are a lot of positives that have emerged out of the R-Power issue:

• The market that had run too far ahead of valuations has corrected for the better after the R-Power fiasco. This gives a lot of opportunities to buy blue chips at attractive price levels. The market which touched 21000 in January 2008 was atleast 12-15 months ahead of the valuations. These levels would have been justified in April 2009, after declaration of FY09 results.
• The undesirable elements in the market, who have taken investors for a ride by playing the Grey Market have learnt their lesson, and will tread cautiously, atleast for sometime. This augers well for the market to move along fundamentals.
• The Book building route for new issues which had become a hunting ground for promoters to charge unreasonable premium would allow only genuine issues to be subscribed in the days to come. we will see only excellent issues hitting the primary market, which will leave scope for capital appreciation post listing.

We must thank the R-Power issue for these positive developments.