i Develop Stocks Advisory

What is the market worry……… REL Power trading in gray market has started at Rs 450 premium to begin with says sources which went on to slide to Rs 110 in the recent melt down of the market. The sources also say the deals are of 60 mn shares in the gray market at an average rate of Rs 250 per share premium which means a price of Rs 700 per share. Reliance Power raised a whopping Rs 12,500 crore from its initial public offering. The Reliance Power IPO was subscribed over 73 times. However, with the sentiment in the secondary market turning bearish, the grey market premium for the first offering from the Anil Dhirubhai Ambani group company declined to Rs 125 from Rs 450 earlier. As per the report of some wire channels REL Power listing price is estimated between Rs 560 to Rs 600 which means a loss of Rs 120 per share to the gray market traders. This tantamount to payment obligation of close to Rs 700 to 750 crs in cash which has already become scare post the crash of market. It is widely speculated that if the payment obligation is met by the traders in the gray market there is no reason why market should bottom out ….? However expert’s feels that any problem in meeting payment obligation in unofficial cash market could have a major impact of secondary market too due to selling of securities to meet these obligations. It is also expected that lot of deals may not be reported due to huge volumes and difference. This is the very specific reason why the Indian markets are on shaky wicket. Though all the trades in gray market are illegal and untraceable, it is surprisingly claimed to have a major impact on the bourses due to already battered stock markets. As per our survey of 150 brokers, 97% hold a bearish view on the market and not ready on do even bottom fishing. 61% are in favour of reentering market only if Nifty crosses 550o decisively. 14% are still optimistic in view of the ensuing RIL gr IPO’s but not ready to invest in the capital market.