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Tags: , |    September 29, 2021


Are you disappointed you could not subscribe to the much talked about Zomato IPO, a first by a FoodTech Indian startup? Or were you anxiously waiting to know if you get the shares, you had applied for during the IPO? Whether you are disappointed or anxious, the question remains –

Should I invest in an IPO or Buy after its listing on the Exchanges?

Do we have your attention? Want to know what we recommend? Well, read on to know which option makes for a better choice.

Liquidity in the economy and a rush of investors to invest has seen Indianbusinesses raise over Rs.27,417 crores through a public offering between January to June 2021. Yet, most used the funds to allow VCs, PE, promoters, and shareholders to exit the business.

Several Indian businesses are lining up for an IPO in the next few months buoyed by the IPO stocks successfully listed in 2020 that are now trading above their issue prices this year. Gaining as much as 400 per cent since listing in some cases and the positive trend on the stock market make investing in an IPO an exciting opportunity for investors looking to enter the market. With Zomato’s successful listing, there are some big names you may consider -Bajaj Energy, Paytm, LIC, Nykaa going public before the end of the fiscal year.

We have a few reasons why you may want to consider investing in the IPO.

#1: Enjoy the first-mover advantage. Yes, you read it right being first in line is not always scary.

When you invest in an IPO, you get the opportunity to buy shares of a business with a high potential to grow at a lower price. The IPO is a chance to make a short-term profit and increase your wealth in the long term. What’s more, the share prices may rise sharply after listing on the stock exchange. Some businesses that doubled investor money on listing in 2021

  • Tatva Chintan- delivered 95% growth and listed on NSE at 2111.80 and BSE at 2111.85. The initial IPO price band was Rs. 1073 -1083.
  • GR Infra- delivered 100% growth and listed on NSE at Rs. 1715.85 and 1700 on BSE. The IPO price band was Rs. 828-837.
  • Clean Science- delivered 98% growth and listed on NSE at Rs. 1755 and 1784.40 on BSE. The initial price band was Rs. 880 – 900.

#2: Fulfill your long-term objectives.

Of course, it doesn’t mean you buy your dream house only after 60.

Equity investments are likely to offer high returns in the long term. When you invest in an IPO, you must wait for substantial gains. The amount you earn in a few years will let you fulfil your financial goals. And, if you’ve managed to pick a winner, then you may not have to wait for retirement to buy your dream home.

#3: Transparent share pricing

Any business planning to go public must issue a Red Herring prospectus and submit it to the SEBI before its IPO. This prospectus includes information about the company, its valuation, the number of shares offered to the public and the price per share. As an investor, you have access to this information even if you have just begun investing. However, once listed, share prices vary based on dynamic market changes and the best price stockbrokers can offer.

#4: Buy at a bargain price and earn big later

The IPO price band is usually the lowest a business you are interested in offers to the public. In some cases, companies offer their shares at discounted prices, which is why many investors invest in an IPO. If you miss out on the investment, the stock prices may rise sharply, and you may find it hard to buy. E.g., the Clean Science IPO price band was Rs. 880-900, which doubled to 1784.40 after listing in July on BSE.

Does this mean that IPO is always the right choice?

No, it is not always hunky-dory, and listing gains you can expect from an IPO. There is an IPO that failed and did not offer the returns investors expected for each successful IPO. Like the ICICI Securities IPO listed in April 2018 at Rs. 519 to 520 per share. However, after the issue, the share price dropped and closed at 15% below the issue price on its market debut. What’s more, the investors are still waiting to see substantial returns after two years of debut on the market.

Does waiting for the stock to list; make sense?

If you are not afraid of the wait and watch the game, then waiting for the stock to list on the exchange would be just your cup of tea. Among the several IPOs, some like Zomato, GR Infra, listed at premium prices. However, others listed at prices lower than the initial offering or dropped due to market changes. In such cases, buying when the shares are cheap makes perfect sense, but investing when prices skyrocket means paying more for less.

Like all investments, equity investments are also subject to market risks and changes in investor behaviour. Do we recommend not considering investing in IPO? Of course, not! We believe you must consider all aspects of the IPO before you decide.

Learn all this concept with tradeshala, Number one share market training academy in Pune.

The Fibonacci Retracements

HomeThe Fibonacci Retracements

The Fibonacci Retracements

The topic of Fibonacci retracements is quite intriguing. To fully understand and appreciate the concept of Fibonacci retracements, one must understand the Fibonacci series. The origins of the Fibonacci series can be traced back to the ancient Indian mathematic scripts, with some claims dating back to 200 BC. However, in the 12th century, Leonardo Pisano Bogollo, an Italian mathematician from Pisa, known to his friends as Fibonacci discovered Fibonacci numbers.

The Fibonacci series is a sequence of numbers starting from zero arranged so that the value of any number in the series is the sum of the previous two numbers.

The Fibonacci sequence is as follows:

0 , 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610…

Notice the following:

233 = 144 + 89
144 = 89 + 55
89 = 55 +34

Needless to say, the series extends to infinity. There are few interesting properties of the Fibonacci series.

Divide any number in the series by the previous number; the ratio is always approximately 1.618.

For example:

610/377 =
377/233 = 1.618
233/144 = 1.618

The ratio of 1.618 is considered as the Golden Ratio, also referred to as the Phi. Fibonacci numbers have their connection to nature. The ratio can be found in the human face, flower petals, animal bodies, fruits, vegetables, rock formation, galaxy formations etc. Of course, let us not get into this discussion as we would be digressing from the main topic. For those interested, I would suggest you search on the internet for golden ratio examples, and you will be pleasantly surprised. Further into the ratio properties, one can find remarkable consistency when a number is in the Fibonacci series is divided by its immediate succeeding number.

For example:

89/144 = 0.618
144/233 = 0.618
377/610 = 0.618

At this stage, do bear in mind that 0.618, when expressed in percentage is 61.8%.

Similar consistency can be found when any number in the Fibonacci series is divided by a number two places higher.

For example:

13/34 = 0.382 21/55 = 0.382
34/89 = 0.382

0.382, when expressed in percentage terms, is 38.2%

Also, consistency is when a number in the Fibonacci series is divided by a number 3 place higher.

For example:

13/55 = 0.236
21/89 = 0.236
34/144 = 0.236
55/233 = 0.236

0.236, when expressed in percentage terms, is 23.6%.

Relevance to stocks markets

It is believed that the Fibonacci ratios, i.e. 61.8%, 38.2%, and 23.6%, finds its application in stock charts. Fibonacci analysis can be applied when there is a noticeable up-move or down-move in prices. Whenever the stock moves either upwards or downwards sharply, it usually tends to retrace back before its next move. For example, if the stock has run up from Rs.50 to Rs.100, it is likely to retrace back to probably Rs.70 before moving Rs.120.

‘The retracement level forecast’ is a technique that can identify upto which level retracement can happen. These retracement levels provide a good opportunity for the traders to enter new positions in the trend direction. The Fibonacci ratios, i.e. 61.8%, 38.2%, and 23.6%, help the trader identify the retracement’s possible extent. The trader can use these levels to position himself for trade.