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Finance minister P. Chidambaram said on Tuesday that the success of the Rs10,000 crore Reliance Power Ltd initial public offer (IPO) shows global investors are confident about the future of the Indian economy.
A finance minister should ideally not offer opinions on the vagaries of individual stocks—be it in trading or during an IPO. While it is true that the minister has not specifically spoken on the pricing of the Reliance Power IPO, his statement could be used by operators to push up the price of the stock in the grey market.
Chidambaram has faced similar criticism before—by speaking in public about the state of the stock market and on the direction of interest rates. His recent statement is especially worrying. Some of the saner minds in the stock market believe power stocks are being valued far more than what is justified by their fundamentals. This could be the bubble waiting to be pricked. Blind confidence can be a dangerous thing.
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