Sensex shocked as Reliance Power Ltd scrip trips

The Anil Ambani-promoted Reliance Power Ltd scrip blew a fuse on listing. Expected to propel Ambani to the top of the global rich-list, the stock instead plunged as much as 22 per cent below its issue price. In a day of widespread market losses, it eventually closed 17 per cent below issue price at Rs 372.50.

In the process, retail investors alone lost Rs 472 crore in the share, which most had expected to trade on the opening day at Rs 900 per share or higher, doubling their investments in the process. The listing has especially hurt those who gambled on a high listing price and had borrowed money to buy these shares.

It was the retail investor's belief in the 'Ambani magic' which had led to a record flow of applications, when Reliance Power opened for subscriptions a month ago. The Rs 10,500 crore issue opened on January 15 and was sold out within a minute. It was eventually oversubscribed a whopping 72 times, garnering over Rs 7,50,000 crore in application money.

But that was on January 15. The story changed dramatically after that. Global markets went into a nosedive on fears of a recession in the US. Even back-to-back interest rate cuts by the US Federal Reserve could not hold the market sentiments.

Indian stocks too, got a hammering, The Sensex has lost 18 per cent in 2008. On Monday alone, it lost nearly 5 per cent, to close at 16,630 points.

The markets may have tested the Ambani magic severely on Monday, though many long-term investors are still optimistic. "I can't believe the price," said Tejpal Singh, a visitor from Nagpur who dropped by at Dalal Street on Monday. "My father has got allotments. But he is not going to sell now," he added. SP Aachooran, another retail investor, said, "I applied for 225 shares, got 16. I am going to wait till the price doubles."

The global market meltdown coincided with somewhat worrying news on the India front. Last week, government figures showed Indian growth slowing. The timing couldn't have been worse for Reliance Power, which had valued its stock on India's $200 billion plan to meet the power needs of a growing economy.