Rel Power will see selling pressure on every rally

CNBC-TV18’s Executive Editor, Udayan Mukherjee - The record date of Reliance Power is material because typically before the record date you see some people loading on the stock to just get the bonus and then sell it. So that might well happen, and it happened to a large extent yesterday, we heard from the street that the record date would be about a week away or 10 days away. But we don’t know for sure, it has to happen somewhere around this because the expected ex-bonus date should be somewhere in the early part of May. So now is the time to have the record date for the bonus.

It’s a short term play, a pre-bonus or a pre-record date; you might see some flurry on Reliance Power but it’s a technical kind of a pop, which will fizzle out once the stock goes ex-bonus. You will see quite a bit of selling once the bonus shares come in, because this is the event which has kept the stock floating around that Rs 330-Rs 340 mark, and nothing else. I wouldn’t be surprised if the stock goes southwards of Rs 300 post bonus, and maybe even gone below that price of Rs 280 which was the price of acquisition post bonus.
 
There is a huge premium of visibility of earnings in the market right now, a lesson which has been learnt in the last couple of months of the fall. Anywhere where visibility is slightly clouded, even for the big stocks like BHEL, stocks are getting punished quite a bit and this stock has no visibility for the next many years, forget the next few quarters. Because of the lack of earnings visibility in the foreseeable and even in the distant future, my guess is that, Reliance Power will find resistance at every higher level and will certainly encounter a lot of selling when the bonus stock comes in. In a scenario where L&T is getting de-rated, with that kind of visibility, I can’t imagine how fundamental investors will find reasons for buying Reliance Power.