Whether to invest in IPOs for listing gains or long-term growth really comes down to what you’re aiming for and how much risk you’re okay with. If you’re looking at listing gains, you’re basically betting on the stock price shooting up as soon as it’s listed. This works best when the IPO is oversubscribed or if it’s in a hot sector.
In 2024, for example - IPO stocks like Bajaj Housing Finance delivered remarkable listing gains. The shares closed at ₹165, up from their issue price of ₹70, marking a massive 135.71% listing gain. But there are some risks here:
- Volatility: Prices can jump up or drop down fast, so it’s not a guaranteed win.
- Overvaluation: Sometimes, IPOs launch at prices that are way too high, leaving little room for further gains after listing.
- Taxes: Don’t forget, if you sell within a year, you’ll pay a 20% short-term capital gains tax.
And here’s a fun fact: In 2024, about 54% of IPO shares were sold by investors within a week of listing. That shows how popular this strategy is. But timing is everything, and if market sentiment shifts, things could go sideways.
Now, if you’re thinking about long-term growth, that’s a different game. This approach is about picking companies you believe in and holding on to their shares for years. If the company grows, your investment grows with it. For instance:
- Multi-bagger potential: Some IPOs in green energy or tech have turned into massive successes for investors who stayed patient.
- Diversification: Adding new companies to your portfolio can spread out your risks.
Of course, it’s not all sunshine. One big challenge is the lack of a track record for IPO companies - they’re new to the market, so predicting their future can be tricky. Plus, their stock prices might dip before they eventually take off.
If you’re not sure which route to go, why not mix it up? You could sell part of your shares for listing gains and keep the rest for long-term growth. That way, you get some quick profits and still hold onto the stock if the company does well in the future.
At the end of the day, it’s about what works for you. Just make sure to do your homework - check the company’s financials, understand its industry, and see if the management team knows what they’re doing. And hey, if you’re ever in doubt, talking to a financial advisor isn’t a bad idea either.