Winning strategies onhow to sell IPO shares.
Buying and selling are crucial aspects of IPO (Initial Public Offering) investments. Once you have been allocated, IPO shares are stored in yourDemat Account. You must sell them at the right time to maximise gains. However, selling IPO Shares requires strategic thinking and planning. This article will guide you on things you should consider before selling, andhow to sell IPO sharesand make profits.
What is an IPO?
IPO is a process in which a privately held company becomes a public company by offering its shares for public purchase in a new stock issuance. Initially, a private company has a limited number of shareholders, restricted to only specific individuals. However, once a company goes public, all public investors can apply for its share and become shareholders.
Companies initiate IPOs to acquire new capital through public investors. There are two types of IPOs you can apply for – fixed price offering and book built offering.
You can read more aboutinvesting in IPOshere.
Factors to consider before selling a stock:
Before we dive into understandinghow to sell IPO shares, let us look at the factors you must consider before selling IPO shares.
- Risk: Most market-linked investments involve high risk, even IPOs. Consider the risk aspect of holding the shares and their impact on your existing personal finances before selling.
- Tax Implications: Gains from IPO share sales are taxable. Understand the tax implications before selling your stock. If you sell shares on the first day or within the first year of listing, you will incur ordinary income tax on gains. However, if you sell one year after the listing, it will be more beneficial as you can optimise your tax bill better.
- Emotional wellbeing: No matter how much you try and avoid, your emotional wellbeing goes for a toss when your hard-earned money is at stake. Whether to sell or hold on for more gains is completely your call. But plan wisely to minimise regret. Avoid making decisions on the go.
- Restrictions to sell: IPO shares come in within a mandatory lock-in period for six months from the day of allotment. The lock-in period is set to avoid dumping of shares which can cause the market value of the share to fall and create a situation of stockinstability. It is advisable to follow the lock-in period and not opt for premature exit.
- Suggestions from broker: Seek suggestions from a broker onhow to sell IPO sharesand when to sell. They have expertise in this domain and may provide valuable inputs. Most brokers suggest not to see before the lock-in period expires. However, they have no legal binding for you to follow. But premature exit may hamper your relationship with your broker.
How to sell IPO shares?
Selling IPOshares can be a challenging task! As you are constantly thinking about whether to sell right away or wait a little more. Here are some selling strategies that can come in handy when selling shares.
- Selling on listing day
As per research and surveys conducted by several traders, most IPOs tend to perform well on their listing days. The performance of an IPO also largely depends upon the timing and market situation it is listed in. However, selling on a listing day is always better than selling after two to three years.
Pay detailed attention to the pre-market duration. Pre-market duration gives you a basic idea of where the stock is heading.
Selling on a listing day is one the simplest method. Plus, selling on a listing day saves you from future losses and gives you enough funds to invest in diversified investment instruments.
- Selling enough to cover your expenses
Selling enough to cover your expenses is another great way to save money and still be in the race to earn profits. Selling only part of your stock is essential to recover your initial investment amount while keeping the other part as it is.
For example, you got 100 IPO shares at ₹ 200; your total investment amount will be ₹ 20,000.
Now, if the market return rate is 40% offering a price per share of 280, you can sell 71 shares of the 100 shares you hold to recover ₹ 20,000. Keeping the other 29 invested as it to earn gains further.
- Selling in instalments
Selling in instalments can prove beneficial for you as the selling takes place after the quarterly report of the IPO company is published. By analysing the report, you get an idea of whether the stock price is likely to rise or fall in the coming quarter. You can also choose to sell your shares little by little every quarter in instalments. Selling in instalments gives you four opportunities to sell in a financial year.
- Selling 50% upfront and 10% each quarter
Selling 50% upfront and 10% each quarter is another effective way to sell IPO shares in instalments. Selling 50% upfront gives you enough shares to cover your expenses and may provide you with some extra money in hand. While keeping the other ratio keeps earning returns that you can redeem every quarter.
Note: These selling strategies are entirely based on your financial standing.
Now that you have a better understanding ofhow to sell IPO shares, you will make a profitable sale from a stronger position.
Recent IPOs have created a buzz among investors, with many wanting to set up a Demat Account. The rise has been considerable, with over Demat account holders having more than doubled in three years to 7.38 crore.
HDFC Bank assists you to engage and participate in the stock market with utmost ease and comfort. You can open a DEMAT and Trading Account with and avail of facilities that assist in margin trading, as well as currency and commodity trading. We assist in providing robust research services and enhance your trading experience with our partners quick and efficient transfer mechanisms.
SEBI reiterated that customers creating new Demat and Trading accounts would be able to nominate themselves or opt-out of nomination.
According to the government data, Demat account holders have more than doubled in three years to 7.38 crore.
So, are you looking to open aDemat Account? Open a Demat account with HDFC Bank today and earn reasonable profits along the way!
Looking to open a Demat Account? Click here to get started.
*Terms and conditions apply. This is an information communication from HDFC bank and should not be considered a suggestion for investment. Investments in the securities market are subject to market risks; read all the related documents carefully before investing.
As an expert in financial markets and investment strategies, I can confidently guide you through the key concepts presented in the article on winning strategies for selling IPO shares. My depth of knowledge in finance, particularly in IPO investments, allows me to provide valuable insights into the nuances of buying and selling in the stock market.
Firstly, let's understand the fundamental concepts discussed in the article:
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IPO (Initial Public Offering):
- Definition: IPO is the process by which a privately held company becomes a public company by offering its shares for public purchase in a new stock issuance.
- Purpose: Companies initiate IPOs to acquire new capital through public investors.
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Types of IPOs:
- Fixed Price Offering: The shares are offered at a fixed price.
- Book Built Offering: The price is determined based on investor demand.
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Factors to Consider Before Selling IPO Shares:
- Risk: Assess the risk involved in holding the shares and its impact on personal finances.
- Tax Implications: Understand the taxable nature of gains from IPO share sales and optimize tax benefits.
- Emotional Wellbeing: Consider emotional factors when deciding whether to sell or hold for more gains.
- Restrictions to Sell: Be aware of the mandatory lock-in period for IPO shares.
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Suggestions for Selling IPO Shares:
- Seek Broker Advice: Consult with a broker for expert suggestions on when and how to sell IPO shares.
- Selling on Listing Day: Consider selling on the listing day when IPOs tend to perform well.
- Covering Expenses: Sell enough shares to recover the initial investment while keeping the remaining for potential gains.
- Selling in Instalments: Opt for selling in instalments based on quarterly reports to assess stock performance.
- Selling 50% Upfront and 10% Each Quarter: A strategy to cover immediate expenses and continue earning returns.
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Demat Account:
- Definition: IPO shares are stored in a Demat Account.
- Growing Trend: The number of Demat account holders has more than doubled in three years.
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HDFC Bank's Role:
- Facilitating Stock Market Engagement: HDFC Bank assists in opening Demat and Trading Accounts, providing research services, and enhancing the trading experience.
- Nomination Facility: Customers can nominate themselves or opt-out of nomination when creating new Demat and Trading accounts.
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Government Data:
- According to government data, Demat account holders have more than doubled in three years to 7.38 crore.
In conclusion, the article offers comprehensive guidance on selling IPO shares, considering various factors such as risk, tax implications, emotional aspects, and market conditions. The strategies provided cater to different financial standings, empowering investors to make informed decisions. The inclusion of HDFC Bank's services adds credibility to the article, suggesting a reliable partner for those looking to engage in the stock market.
