The IPO Frenzy and Listing Day Gains – Are You Excited about Hyundai Motor India?
By Brijesh Bhatia (Twitter: @bbrijesh9)
Pune, 22nd October 2024: The Initial Public Offering (IPO) market in India has been a hotbed of activity as markets trend higher. Companies are raising capital by going public, and investors are largely look for opportunities to make quick listing gains while a few others might invest in promising businesses for the long term.
From Tata Technologies to Bajaj Housing Finance, the stories of IPOs have thrilled retail and institutional investors alike. Yet, the frenzy surrounding IPOs requires both a short-term and long-term perspective, as both approaches can lead to different scenarios of success for investors.
But what are the key strategies for capitalising on an IPO, and how should one strategise the balance between immediate listing gains and long-term growth?
The Theory of Applying for IPOs for Listing Gains
One of the most common strategies for attracting investors to IPOs is the prospect of listing-day gains. This approach is simple: investors apply for shares in an IPO, expecting the stock price to surge on the day it is listed on the stock exchange. This surge often happens because of the pent-up demand from those who did not get the allotment during the IPO.
Tata Technologies IPO (November 2023)
Tata Technologies’ IPO in November 2023 was a much-anticipated event and those who were lucky enough to get an allotment reaped significant rewards. The stock opened at ₹1,188 and hit a high of ₹1,386 on its listing day. The IPO price was Rs.500 and listed with gains of 137%.
Source: Tradepoint, Definedge Securities
This approach works well for investors looking to take advantage of the initial surge in demand. Many IPOs in India, especially in high-growth sectors, tend to be oversubscribed, which means there is often excess demand that drives up the price once the stock hits the market.
Advantage of Listing Gains
Quick Profits: This strategy works well for investors looking to make a quick return on their capital, especially in IPOs that have generated significant hype.
Less Exposure to Market Volatility: By selling on the listing day, investors avoid the risk of market corrections that could erode their gains over time.
However, the strategy also has its challenges. Not all IPOs will see a significant price jump, and some may even decline after listing due to market factors or unrealistic valuations, and they may end up in losses.
The Long-Term Hold Strategy: Riding the Growth Story
While listing gains offer short-term profits, some IPO investors prefer to hold onto their shares with a long-term view. This approach focuses on the company’s growth potential rather than immediate gains.
Investors who believe in the company’s business model, leadership, and growth prospects may see significant returns over the years, especially in companies from high-growth sectors like technology or consumer goods.
Tata Technologies IPO (Long-Term Perspective)
Although Tata Technologies saw a strong listing day gain, the stock has yet to surpass its listing day high after nearly 11 months. The stock opened at ₹1,188 and hit a high of ₹1,386 on the first day. However, it has traded below this high ever since.
For long-term investors, this is not necessarily a reason for concern. Tata Technologies underlying business remains robust, and investors with a longer time horizon may still see significant returns as the company grows and expands its operations globally.
Holding the stock after listing day requires patience and belief in the company’s fundamentals.
Bajaj Housing Finance IPO: A Recent Case Study
Another recent example is Bajaj Housing Finance Ltd., which was listed at ₹150 and quickly surged to ₹188 in just a few trading days—short-term investors who sold at the high booked handsome gains. However, since then, the stock has corrected by nearly 30%, providing a reminder of how quickly prices can fluctuate post-listing.
Source: Tradepoint, Definedge Securities
For long-term investors, this correction presents a different opportunity. Instead of panicking, they may view the price dip as a chance to accumulate more shares at a lower valuation.
Bajaj Housing Finance, backed by the Bajaj Group’s reputation and the strong fundamentals of the Indian housing market, could present a significant upside over the years for those willing to hold.
Tools for IPO Traders: Listing Day Breakout Scanner by Definedge
Definedge’s RZone platform provides a powerful tool for those looking to capitalise on listing day movements: the Listing Day Breakout scanner. This tool allows traders and investors to scan for stocks that show a breakout on their listing day, whether bullish or bearish. By identifying such patterns with a single click, traders can act swiftly to take advantage of short-term price movements.
This scanner can be handy in volatile IPO markets, where quick decisions based on technical indicators can significantly affect profits. Whether you are looking for stocks that break out to the upside or downside, the Listing Day Breakout scanner simplifies finding opportunities.
What About Hyundai Motor India Ltd.?
Hyundai Motor India Ltd. debuted at Rs.1,934 and ended down by 7%. The IPO price was Rs.1,865 to Rs.1,960 per share, and investors looking for the listing gains may end up incurring losses.
Given Hyundai’s global reputation and a strong foothold in the Indian automotive market, did you apply in the IPO for listing gains or its long-term growth?
Balancing Listing Gains with Long-Term Wealth Creation
The IPO frenzy in India continues to excite both retail and institutional investors. Whether you are seeking listing day gains or planning to hold for the long term, there are strategies for every type of investor.
As Tata Technologies and Bajaj Housing Finance have shown, IPOs can provide immediate profits or long-term wealth creation, depending on how you approach them. You can now analyse the company’s performance with Definedge’s Radar.
Disclaimer: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. This article is strictly for educative purposes only. As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/ commodities/ cryptos/ any other assets discussed here. However, clients of Definedge may or may not own these securities.
(Brijesh Bhatia has over 18 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face in the business channel as a Market Expert and has worked with broking giants like UTI, Asit C Mehta, and Edelweiss Securities. He is currently a Senior Research Analyst and Editor at Definedge.)
