Ahead of Reliance Power IPO

Everyone is trying to answer one big question today (08th Feb 2008). What should I do on Monday (11th Feb 2008) when Reliance Power is listed? There seems to be two options evolving. One, to be a flipper and move into power stocks. Two, to move out of power sector completely into more lucrative ones like financials, telecom, consumer durables and cap goods. Have a look at how valuations have changed from the close of IPO on 18th Jan 2008 till date (08th Feb 2008). Reliance Energy has come down from 35.9 times to 32.5 times. NTPC from 23.9 times to 20.1 times and Tata Power from 46.8 times to 43.7 times. The valutions though taken a beating do not look attractive at all.

There have been a few people who have been accumulating over the past week as suggested by the delivery volumes. I suppose they are doing with full knowledge. I say this because other indicators do not suggest that to be a wise move. On the F&O front huge short positions have been accumulated in all three major power stocks. These stock prices have taken a beating ahead of such an important listing in the history of the markets. The sentiment on the sector is negative even though most hope for a good listing gains from the IPO. Market watchers suggest the above two strategies - move out of Reliance Power - move out of power sector. For more enterprising ones, short power in F&O.