The stock market has become the new goldmine of the treasure hunters of the modern day. And many such hunters are also finding easy paths to treasures such as IPOs.
IPOs have yielded several good results in the market in recent times. This might be because the number of people looking out for IPOs to invest their money in for improving their growth, is steadily increasing.
This, in turn exponentially increases the popularity of IPOs as they are looked at as a way to easily increase a person’s wealth through the practice of trading in the stock market. But this popularity also brings with it its fair share of problems.
With the sudden increase in investors, there are now more investors and fewer IPOs to be distributed equally among everyone. Thus, luck is involved when deciding who will be the investor who shall be getting the IPO.
To help you through your investing journey, and learn a little along the way about them, we bring you some of the most effective techniques on how to increase chances of IPO allotment.
1. Limit the number of applications
It is normal for someone to think that their chances of getting an IPO would increase if they submitted multiple applications for the IPO. But that is not the case.
When you apply for an IPO, you do so with your Demat accounts. But your Demat accounts are registered under your PAN numbers. Hence, it is visible when you submit multiple applications.
If it is detected that multiple applications have been submitted under the same PAN number, all of the applications will get rejected automatically, resulting in a loss of opportunity.
2. Use small amounts
There is a common myth among investors that bidding for a large amount of IPOs will increase your chances of getting it. But unfortunately, this is not true.
An individual retail investor can bid up to a maximum of Rs 2 Lakh for an IPO. But if there is an overabundance of bidders, the IPO will be given to selective investors who shall be decided based upon a lottery-based system.
Having a higher amount in play does not mean that you would have an increased chance of getting selected. Rather, there are other ways of increasing your chances in such a lottery.
3. Use multiple Demat accounts
This might be a point that might contradict one mentioned earlier, but please bear along. It is mentioned before that applying multiple times is damaging to your chances, which is true. But the best and easiest way to work around this problem is to apply from multiple accounts.
You can create multiple Demat accounts registered from the PAN numbers of your friends and families. This would allow you to place bids on the same IPO from multiple separate accounts.
As the accounts created are registered under different PAN numbers, they would be counted as separate users and, hence, they would significantly increase your chances of getting an IPO.
4. Always be wary of the Cut-off price
A cut-off price refers to the upper band of the amount that can be placed for bidding on the IPO. It is decided beforehand and tells you the maximum amount that can be placed for buying.
For example, if an IPO is announced with an accompanying price band of Rs 110-145, then Rs 145 would be the cut-off price. Placing a bid at the cut-off price shows that you are comfortable playing anywhere between Rs 110 to 145 for the IPO.
Placing a bid anywhere below the cut-off means you are not paying the maximum amount possible for the IPO. Therefore your chances get significantly decreased. On the other hand, bidding for the cut-off gives you the maximum chance of being selected.
5. Start applying well in time
Whenever you go out to fill in an IPO application form, you might observe the number of days the IPO is available. Generally, an IPO is available for three days for applications.
A lot of investors wait for the third and final day to apply. This is because they wish to evaluate the popularity of an IPO before applying for it. But this is the opposite of what should be usually done.
To increase your chance, you should fill out the applications in the first two days. This is a precautionary step as there could be many other problems on the last day such as technical glitches or too many applications for the IPO.
6. Approve the mandate request
This is a mistake generally made by the people who are newly introduced to the trading world. What they do not know is that their work is not complete just by applying for the IPO recommended by the broker.
Anyone who applies for an IPO receives a mandate request that they need to approve first. The mandate request can be accepted from the website or banking app of your choice that you use.
If the mandate request is not accepted, maybe due to some distraction, the funds allocated will not be locked in your account, thus making it so that you are not even considered for the application.
7. Verify your details
Increasing your chances of IPO allotment could be done by carefully examining the application to be submitted for the IPO allotment.
This means that before submitting, you should allow someone else or yourself to evaluate your work and look for any discrepancies that you can work upon.
There have been reports of countless applications for IPOs being rejected because apparently, there were many mistakes in the form that was filled out while applying for an IPO.
It is important that you finely observe and correct every mistake that you may find in the application so as to not get disqualified without any reason, but also increase your chances with a well-written application.
Bonus Tip #1 🔥 –This strategy will not be applicable in all cases. But it is highly effective in cases where the shares of the parent company may also be available for purchase. Owning a single share of a parent company allows you to apply for IPOs not from the retail side, but from the shareholder’s side. As the IPO competition could be tougher, approaching from the shareholder’s side reduces the competition by a significant margin due to the decrease in people anxious to gain a PPT.
Bonus Tip #2 🔥- If you are applying for IPOs worth more than ₹2 Lac, you’d be involved in IPO form filling. In such a case, make sure to verify all the details, evaluate your work, and free from all mistakes.
IPOs are a great feature of the stock market. They are a great way for newcomers to get used to the high-stakes atmosphere in the market. They also serve as a new source of enjoyment for veteran investors.
With the tools now at your disposal, you can easily boost your chance of gaining an advantage over your competitors and bagging an IPO. It is up to your capability, how you may use them to their fullest.
The stock market is a gold mine, and the wait is now of treasure hunters.
In case you want to increase your chances of IPO allotments, our very own IPO tool, PriMarket is the right place to apply online and invest in companies getting listed on the Exchanges with your UPI.