If a small-time share climbs to stratospheric heights in a very short time it only takes along gullible investors who by definition have a preference for a nasty landing. But sensible investors who have made handsome profits in Dalal Street or any other street in the world have not ridden such roller coasters to prosperity. Instead they have invested rationally and profited from it. The one message from the kerfuffle over the listing price of KGN Industries and Sylph Technologies is that there is no place for expecting windfall gains in the stock market. Unlike a government tender, rising prices of a stock promptly catch attention and that is the end of its dizzy flight. Other punters will put their money on or against the stock to bring it down. There would have been reason to be concerned if the markets habitually saw massive uptick on listing days for many stocks. Instead in 2008, the markets have actually gone the reverse way and punished stocks which it felt were overvalued. Reliance Power IPO actually saw a reverse sense of outrage but predictably similar calls to protect investors.
This is not to say the Indian stock market is a model of perfection. But if in the span of three months the markets promote a rank outsider and punish a relative heavy weight that is something which does not need to be fixed. It just shows that there are enough contra movements in the market, which are, not surprisingly, well informed. Moving on to technicalities the sudden rise will surely revive plans for bringing in a price band mechanism of say 20% to be applied by exchanges for all cases of re-starting of trading. That is for Sebi to take a call. On the flip side of such bands is the objection that there could be changes in the dynamics and fortunes of a corporate and after re-listing, which the market would need to take cognisance of. All in all the gyrations make for a good summer read but to expect this to be a rags to riches story is too much to believe. However the opposite may be true but then a fool and his wealth are soon parted. The crucial thing to remember when looking at stock market narratives is that markets are not supposed to be on even keel all the time?then there would no use for markets.