How IPO Results Influence Your Investment Strategy: What You Need to Know

As of September 2024, about 57 IPOs in India have raised a total sum of ₹62.675 crores. These initial public offerings (IPOs) have become anticipated events in the Indian finance world, offering investment opportunities to many.

There is no denying that IPOs can be a lucrative investment opportunity when you know what move to make at the right time. However, this will not be possible unless you understand how these results influence your investment strategy.

In this blog, we will learn about different aspects of how IPO results affect investment strategies individually. So, let’s get into the details and make you a more informed investor.

Factors Influencing the Success of IPOs in India

As soon as you launch an IPO, the first-day performance and the subsequent market valuations determine if this has succeeded. That said, let’s check some of the factors that influence an IPO’s success:

Market Conditions: The day you launch an IPO in the market, the overall economic conditions and market sentiments play an important role in influencing the IPO’s performance. If the market conditions are favourable on the day of the launch, it will positively impact the IPO’s performance and vice versa.
Demand from Investors: Another important influencing factor here is the demand from investors for the IPO. The higher the demand, the better the IPO’s performance on the first day and the subsequent inflated market valuation.
Fundamentals of the Company: If your company has strong finances, a robust business model and a competitive advantage, chances are that your IPO result check will be a hit. You must analyse profitability, growth, management quality, and market share.
Allocation and Pricing: An IPO’s overall price and allocation of shares are two of the most important factors here. Overpricing an IPO can reduce the price of the stock after the IPO, while underpricing can often lead to an increase in price on the first day.

How Do IPOs Influence Your Investment Strategies?

An IPO can influence an individual’s investment strategy in more than one way. Some of the best-known of these ways include the following:

Riss Appetite: It is no secret that IPOs are more risky than investments in well-established companies. Therefore, investors with higher risk appetites are more likely to invest in an IPO to diversify and reduce risk.
Comparing Short-Term Gain with Long-Term Values: There is no denying that an IPO is an excellent way to generate appealing short-term gains. However, you must still not lose focus on the company’s value. You can determine this intrinsic value by evaluating the competitive landscape, growth potential and industry trends.
Due Diligence and Research: Proper research and due diligence are very important requirements for investors with a taste for IPOs. You cannot leave out even the slightest details and analyse everything from finances, management and competition.
The Fear of Missing Out: There is a lot that goes into marketing an IPO launch these days with an intent to create a fear of missing out among investors. This often results in investors making impulsive decisions with a promise of quick gain or just a positive market sentiment. An informed investor must avoid these pitfalls, leverage proper IPO status checks, and make the right decision based on the available data.

In Conclusion

Most people will agree that IPOs offer excellent investment opportunities, and monitoring these opportunities through a proper IPO dashboard has become very important. However, you must not ignore the risks of these opportunities and make choices accordingly. You must try to understand different aspects relevant to the market and your decision accordingly. An effective stock screener app like Research 360 from Motilal Oswal will help you in this regard.