Just wondering if someone has done the work already. Generally, there is usually a dip at the expiry of three lock in periods
30 days - Anchor investors can sell 50% of their holdings
90 days - Anchor investors can sell remaining 50% of their holdings
6 months - Promoters & pre-IPO shareholders can sell their holding
However, there can also be gains during this period which can cover these dips and then some. So by waiting, long term investors can lose out on these gains.
If you are aware of any, please share any thorough data analysis or studies specific to the Indian markets. Not looking for anecdotes or opinions, there are enough of those
Compiled list of IPOs from 1st April 2022 to 31st March 2024 (as lockup period was changed from 1 year to 6 months from 1st April 2022).
Calculated returns* after expiration of 1mo, 3mo and 6mo lockup periods.
Calculated returns* 9mo after listing date.
Counted how many times returns was negative after 1mo/3mo/6mo lockup period and positive 9mo after listing date (2nd condition to eliminate negative 1mo/3mo/6mo returns due to general bad performance of stock).
*Returns are relative to NIFTY500 benchmark i.e. difference between the returns of the stock and NIFTY500 returns in the same period.
Results
7 out of 86 stocks had negative 1mo returns and positive 9mo returns
8 out of 86 stocks had negative 3mo returns and positive 9mo returns
5 out of 86 stocks had negative 6mo returns and positive 9mo returns
Caveat
This is not a statistical analysis. I don’t want to spend too much time on it. Also standard disclaimer - past data is not reflected of the future.
Conclusion
For me, this simple analysis shows that it is suboptimal to wait until expiry of lockin period for stocks that give positive returns as most likely they will start their gains from day 1 and any sort of downwards movement in prices due to dips isn’t sufficient to put the stocks in negative territory.
My strategy for any IPOs i have been fortunate enough to have been alloted with has been to have a target PE/exit price and in case price shoots up way above this during listing or within a few days is to have trailing Stop loss of 10-15% to protect upside/downside(sounds ironic!) regardless of time period or what anchors/institutions do
Have been successful with almost all allotted shares (Azad engineering, Waaree, Bajaj housing, Enviro infra, Vishal mega Mart). All rose way beyond what fundamentals would indicate in market filled with euphoria and triggered stop losses. Currently not even holding 1 company whose shares i was allotted during IPO(I’m talking only about allotments in around 2 years timeframe) and almost all are now trading at significant discount to my selling price
Ofcourse people would say you will lose significant chunk to short term capital gains but IMHO the downside from crazy valuations is much higher than whatever little you will save on STCG( eg Bajaj housing, Waaree, etc which are trading 50% or so below peak prices)
