Recent IPOs have brought impressive gains, but do those initial highs really last? Investors might want to think carefully about when to cash in on their profits.
If you’ve enjoyed strong gains from recent IPO listings, it might be wise to consider booking profits sooner rather than later. While the initial excitement can lead to impressive first-day gains, history shows that these spikes often don’t last.
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Since January 2023, over 100 mainboard IPOs have been listed, with 22 companies seeing their shares hit the upper circuit limit on debut day, according to Samco Securities. However, more than half of these stocks struggled to maintain that upward momentum in the following weeks.
Out of 18 companies listed for over a month, 11 experienced declines ranging from 0.4% to 40%, while only eight managed to return gains between 7% and 90% during the same period, according to a report on The Economic Times.
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The trend highlights the volatility and unpredictability of IPO stocks post-listing.
For those who applied for IPOs primarily for quick profits, selling on the listing day might be the best strategy.
Arun Kejriwal, founder of KRIS, told The Economic Times that investors should consider exiting as soon as they see their shares locked at an upper circuit limit on debut day.
RBZ Jewellers stands out as a top performer, showing an 89.7% gain in its first month and a 45.6% increase since its muted listing. On the other hand, Vibhor Steel Tubes has been the weakest performer, with a 34% decline since its debut.
For investors choosing to hold beyond the listing day, it’s crucial to monitor price trends closely.
Apurva Sheth, head of research at Samco Securities, said riding the momentum as long as the stock remains above its listing day high. If the share price falls below that closing price, it could indicate further declines.
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Recent listings like Tolins Tyres and Bajaj Housing Finance have also seen drops after initial surges. For instance, Bajaj Housing Finance closed at Rs 163.74 on a recent Friday, down from its listing day’s closing price of ₹165.
For those looking to hold stocks longer, Kejriwal recommended using a trailing stop loss, setting it to the previous day’s high. This way, investors can exit if the stock price dips below that threshold.
And for those considering investing in newly-listed stocks, Sheth suggests waiting at least six months. This allows time for the market frenzy to settle and for investors to evaluate quarterly results before committing.
