IPOS will remain the darling of retail investors owing not only to the recent decent performance, but also because of lucrative IPOS in the pipeline this fiscal.
The issue with investors' participation in IPOS is that if the issue is of good quality, there is huge participation from both retail and institutional investors. Hence, in the end, the allocation of shares is minimal due to oversubscription. So the problem is that investors do not get decent allotment for good issues, and for
not-so-good issues, investors do not want any exposure. How does anyone make money in such a scenario. Here is where the IPO funding can be used intelligently by investors to improve their chances of allocation and to make some money by using flipping strategy. However, even when one is adopting the IPO funding route for participation , in cases of IPOS getting huge response, the break even point is pushed higher, thus making the whole game riskier. IPO funding can be used when there is reasonable data (subscription) to support
the success of the IPO and the risks are fully known by the investor.
Investors will have to take a portfolio approach and decide on how much funds should be allocated to IPOS. In a bull market scenario, the opportunity cost of parking funds in IPOS goes up and no investor can afford to have his capital blocked in an unproductive manner when the stock prices are appreciating. IPO investing needs to be done carefully and should involve considerable amount of basic home work.