“IPOs Sahi Hai” for Retail Investors – Why?
Initial Public Offerings (IPOs) can be an attractive opportunity for retail investors when chosen carefully and with proper understanding. Here’s why many retail investors consider IPOs as part of their investment journey:
1) Short holding period:
Unlike stocks or mutual funds, IPO applications usually block funds for a limited period (generally 7–10 days), making them a short-term opportunity compared to long-term investments.
2) Potential for listing gains:
Well-received IPOs may list at a premium to their issue price. In such cases, retail investors with a single lot allotment can potentially earn a reasonable return within a short time frame. (Returns vary based on market conditions and demand.)
3) Lower capital blockage compared to long-term investing:
In equity stocks and mutual funds, capital is often invested for longer durations to realize meaningful returns. IPO participation allows investors to explore opportunities without long-term capital commitment.
4) Market cycle independence:
Even during weak or volatile market phases, select IPOs may perform well on listing due to strong fundamentals or favourable market demand. However, broader stock and mutual fund portfolios may face short-term pressure during such periods.
5) Lower short-term risk compared to active trading:
When IPOs are evaluated carefully, the risk associated with listing-gain strategies may be relatively lower than frequent short-term trading, which involves higher volatility and timing risk.
6) Wealth building opportunity with discipline:
With a disciplined approach, informed selection, and realistic expectations, IPO investing can form a useful part of a retail investor’s overall strategy. Outcomes may vary depending on allotment, market sentiment, and issue quality.
(Disclaimer:
IPO investments are subject to market risks. Listing gains are not guaranteed. Past performance of IPOs does not indicate future results. This content is for educational purposes only and should not be considered investment advice.)
