Mastering IPOs: Your Ultimate Guide to Profit Booking and Allotment Strategies
If you ever apply for an IPO or plan to do so in the future, then today’s content could be the most important information you encounter.
In this post, we will discuss two crucial points regarding IPOs:
- When to Book Profits After Allotment
- We’ll examine the best strategies for both mainboard and SME IPOs.
- Maximizing Your Chances for Allotment
- I’ll share several tricks to help you increase your likelihood of receiving shares.
Let’s dive into these essential strategies.
Profit Booking Strategies
Understanding IPOs
First, let’s clarify what happens in both mainboard and SME IPOs. If you secure allotment in any IPO, based on past data, when should you consider booking profits?
Mainboard vs. SME IPOs
- Mainboard IPOs: Historically, the data indicates that if you apply a buy-and-hold strategy, there are years where you would incur losses. In contrast, the listing strategy has shown to yield profits in 100% of the years examined.
- SME IPOs: These require a different approach. As we’ll discuss later, the rules change when it comes to profit booking.
The Rule of 15
To book profits efficiently, I follow the Rule of 15. This means that for the majority of IPOs, you should aim to book profits within the first 15 minutes of listing.
- If the IPO is a significant mainboard listing, where excitement is high and the listing opens strongly, I may trail the stop loss based on the low of the first 15 minutes.
How to Execute the Strategy
- Book Profits Quickly: In most cases, sell your shares in the first 15 minutes post-listing or during the pre-open session.
- For Strong Listings: If you notice the stock is gaining traction, use the low of the first 15 minutes as a trailing stop loss. Monitor it for up to two and a half days.
Maximizing Allotment Chances
Demat Accounts
To increase your odds of getting allotment, ensure you have a demat account for every family member.
- Consider opening accounts for children, HUFs, or even in the name of a company.
Application Strategy
Assuming you can allocate funds for an IPO (let’s say ₹3 lakhs), here’s how to distribute it:
- Apply through Multiple Names: Aim for 10 retail applications across different family members.
- Small HI Application: If you have leftover funds, consider applying for one small HI application for a slightly higher chance.
Understanding Over-subscription
In a highly over-subscribed IPO, if you apply for ₹10 lakhs, you can only expect a small allotment based on the oversubscription rate.
Strategies for SME IPOs
When it comes to SME IPOs, use the Rule of 5. Here’s how:
- Avoid Pre-open Selling: Do not sell during the pre-open. Wait for the listing.
- Monitor Performance: If an SME IPO opens strongly and sustains its price, wait until the third day for profit booking.
Final Thoughts
This guide outlines strategies for both mainboard and SME IPOs, giving you the tools you need for successful profit booking and allotment maximization.
If you’re looking for assistance with mutual funds or need help opening a demat account, check out the links in the description.