An initial public offering is a marvellous way to invest money in a short timeframe. But before entering this chaotic Indian stock market, where stock prices fluctuate every second, you must first research, investigate, and comprehend the various techniques a trader or an investor employs.
As a newbie, learning all the strategies and techniques of investment and trading is crucial.
Nevertheless, you can make sagacious decisions by analyzing a particular company and conducting calculative research after having advanced technical analysis course from the best Stock Market Institute in Delhi.
The key to investing in an IPO is knowing all the ins and outs of the company. So first, look closely at the business’s current state and potential in the coming years. Second, learn the company’s market segment it deals in.
If you plan to invest in an IPO, this piece will serve as an informative guide.
IPO – What is it?
IPO, known as Initial Public Offerings, is a process in which a private company, whether new or old, transforms itself into a public company by selling its shares to the general public. Investing in such a process allows wise investors to maximize their investment returns.
A company initiates IPO for many reasons, i.e.
- Infusing new equity capital into the firm
- Raising funds for future expansion and
- Easy trade for existing assets.
- Opportunity to become more transparent & regulated.
Here are Five Golden Rules You Should Never Forget Before Investing in Any IPO
Indeed, not all IPOs perform well, but keeping these golden rules in mind can help you make an informed choice. Rules are:
Use a mobile application for investing in an IPO, which is a convenient investment method. Like Zerodha, Upstocks, Grow, and many more.
Documents To be Linked Online
- Aadhar number
- Details of Pan Card
Investigate The Whole Company
- Research thoroughly through any company you think you might want to invest in.
- Take a close look at the prospectus, figure out what the company intends to accomplish by issuing an IPO, and gauge how the money will be spent.
Stay up-to-date with current market trends.
- Trends in the market are closely related to IPOs.
- In times of rising market trends, IPOs become more active.
- If the trend is upward, the most efficient way to stockpile wealth is through IPOs.
Monitor the Application’s Volume.
- Oversubscriptions are inevitable when an IPO is regarded as a reliable investment option.
- The more applications enter, the fewer shares you own.
- So it would be best to track how many applications the IPO receives.
IPO investing: How To Get Started
The initial public offering has the potential to grow exponentially in a short period, which makes it a popular investment strategy.
However, there are specific steps that investors must adhere to achieve wealth and understand how IPOs work.
Investors should follow the following steps:
Step 1) Decision
- For an investor, the first step is to determine which IPO he wishes to apply for.
- Decision-making can be easy for existing investors, but it could be intimidating for a newbie.
- In order to make a decision, investors need to review the prospectus of the company that is issuing the IPO, which helps them to discover the business plan of the company and its motive for uplifting its stocks in the market.
- Following the investor’s decision, the next step is.
Step 2) Arrangement Of Funds
- As soon as the investor has made his decision, the next step for him is the arrangement of funds.
- Now it depends upon the investor if he wishes to use his savings to buy an IPO or if savings are insufficient, he can avail of a loan from Non-Banking Financial Organisation & banks at a fixed interest rate.
Step 3) Set up your Demat-Cum-Trading Account.
- If an investor wants to apply for an IPO, he must have a Demat account.
- The role of a Demat account is to provide provisions to investors so they can store their shares and other financial securities in an electronic form.
Step 4) The Application Process
Some financial organizations propound provisions allowing you to bunch your bank account with your Demat account.
- After creating the Demat account, the investor needs to get familiar with the ASBA facility, which is called Application Supported by Blocked Account.
- This facility is imperative for every IPO investor.
- ASBA application enables the bank to arrest the funds of the applicants.
- ASBA forms are avail in both physical & Demat forms to IPO investors.
- This facility, however, cannot be accessed through checks or demand drafts.
- Last but not least, the investor has to provide specific details in the ASBA application, i.e., Bank account number, PAN number, Demat account number & bidding details.
Step 5) Bidding Details
- We all have seen how bidding takes place in an auction, the same way an investor has to bid while applying for shares as per the size of the lot mentioned in the prospectus.
- The size of the lot depends upon the minimum number of shares applied in an IPO by an investor.
- During the bidding of an IPO, the investor can make revisions.
- A critical point to note is that when bidding, the investor needs to block the necessary funds.
Step 6) Allotment
- In the allotment process, if the demand for shares is high, it automatically exceeds the number of stocks released in the secondary market.
- As part of the allocation process, if shares are in high demand, more shares will be released on the secondary market than will be allocated.
- In these situations, the bank unlocks arrested funds either entirely or partially.
- Upon the closure of the IPO process, an investor who has received a full allotment of shares will receive a Confirmatory Allotment Note.
Once the above steps ensue, the investor has to sit, relax and wait until the stock gets listed in the share market. Usually, the stock gets listed within seven working days when finalized.
IPOs can be an extremely lucrative opportunity for small investors in the capital markets.
It’s also proven that IPOs guarantee profits. Still, they are useless unless you analyze the financial metrics, prospectus, in & outs of the company & current market trends.
If you’re willing to make profits through an IPO or want to grab profitable stock market opportunities, then the Stock Market Course in Jaipur by NIWS can be your saviour. The highly-expertise and professional faculty will offer guidance on the share market from scratch, revealing their experienced tips to minimize losses.