Today's investing mantra "Investors should be very wary of purchasing today's hot issue. Most initial public offerings underperform the stock market as a whole. The managers of the companies themselves try to time their sales to coincide with a peak in the prosperity of their companies." - Burton Malkiel
The festive season seems to have already begun for the Indian stock markets, or so it seems. With India's largest IPO - Coal India Ltd. - just round the corner, predictions have started flowing in as to the extent of listing gains the stock can provide. And joining the party is none other than the company's chairman himself.
A leading business daily has quoted the chairman of Coal India Ltd. (CIL) as saying that 'the listing gains from CIL will be big'. We believe that getting carried away in the rising tide of bull markets is a normal human behaviour. But the managements trying to talk up their stock prices, or attract investors to their stocks by making such statements, is irresponsible behaviour. We last heard such reckless statements in January 2008, at the time of floatation of the previous biggest IPO of Reliance Power. And that coincided with the peak of the Indian markets.
What business do managements have to perk up interest in their companies' stocks? Why do they publicly comment on the future of their stock prices? Isn't this irresponsible behaviour?