Should you buy stocks which gained 100% or more on listing? Things to know for IPO investing | INTERVIEW

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October 16, 2020 4:22 PM

Prakarsh Gagdani is positive about the equity market in the long-term, however, the performance also depends upon the corporate results and policy changes in the future.

IPO, indian share marketPrakarh Gagdani also added that IPOs are a very smart way to invest especially for the people who are new to market

In the month of September alone, Indian markets saw over half a dozen initial public offers (IPOs), where Happiest Minds Technologies, Route Mobile and Chemcon Speciality Chemicals more than doubled on market debut, listing with over 100 per cent gains. But should this fact be enough to invest in any stock which logged 100 per cent or more gain on the share market listing? Prakarsh Gagdani, CEO, 5Paisa.com, says that it depends more on the investment objective of the investor. Prakarsh Gagdani also says that IPOs are a very smart way to invest, especially for the people who are new to the market. In an exclusive interview with Surbhi Jain of Financial Express Online, Prakarsh Gagdani says that there are a few things which must be considered while making investments in IPOs. In order to make a COVID-19 proof portfolio, he bets on a few sectors such as pharmaceuticals, automobiles, among others.

1. In September alone, we have seen over half a dozen IPOs. What would you advise investors putting their money in IPOs?

IPO is a very smart way to invest especially for those who are new to the market. There are a few things that one should consider if they are looking at investing in the IPO. Firstly, be clear with your personal goals – whether you are looking at listing gains or are looking at it as a long term investment. Secondly, you should look at the fundamentals and liquidity of the company. You should do your own due diligence when it comes to the company’s financials, its performance in the last few quarters, reasons for the issue, how the fund would be utilised, the reputation of the top management amongst others. These key factors will give you a good clue about what to expect from the company, which is quite essential before you carry on with your investment.

2. If a stock logs 100% or more listing gains then is it worth investing?

If the fundamentals of the company are strong and the growth seems to be positive for a year or two, then definitely it is worth holding. But if you are an investor who has just invested for the listing gains then it is okay to book profits.

3. Currently which themes look attractive to build a COVID-19 proof portfolio?

The economy is now finally opening up. There are sectors which are performing much better as compared to the last few quarters. For example, sectors like Edtech, pharmaceuticals, OEMs, Automobiles, agriculture and allied sectors are performing better. Further with easing lockdown even other sectors like hospitality and retail are starting to pick-up. So now I do not think there is any such thing like COVID-19 proof portfolio. An investor has to build a portfolio taking into account the companies which are showing a promising future in terms of business.

4. What are the key factors which could weigh on and support D-Street going ahead?

The key factor is obviously the economy. The way economic indicators like GDP numbers, sectoral performance, how people are adopting the new way of working and reduction in the covid cases would be the key factors that might weigh on and support D-Street going ahead.

5. How do you think the recent RBI policy will affect the markets for longer-term?

We are positive about the equity market in the long-term, however, the performance also depends upon the corporate results and policy changes in the future. Though in the recent policy, the central bank has held the key rates it has made up for the status quo. Besides, the sentiments for the bond as well as the equity markets are quite positive with RBI deciding to continue with the accommodative stance of monetary policy.

6. Bears took over the markets in September. What according to you dampened the investor sentiment?

I do not think we should look at it like bears are taking over. The markets were at one-sided rally from the lows of March. Every month Nifty has gone up from the low of 7,500 to a high of near 12,000 (around 11,800) that is almost a spike of 50% – 55%. So if there is a month-long breather, it does not imply that the bears have taken over the market.

Secondly, September also saw a humongous disruption in the industry with respect to the regulatory changes in the margin pledge. And this was entirely for retail. That is why it took a while for the retail investors to adjust to the new changing rule and that is one of the reasons why retail participation in the markets was low. But if you see October, again the market picked up and from the lows of around 10,800, Nifty is touching high of 12,000. So I believe it was just a momentary break.

7. How many first time investors have you seen on your platform during a pandemic? Are they investing in other asset classes, besides equities, using your platform?

Over 80% of our customers are first-timers. These are the new customers coming to the capital markets for the first time. During the Covid times, the number of new investors has increased exponentially as the potential investors having liquidity are beginning to realise that they need to save and grow money for unprecedented times like today. So they are turning to the capital market as it is offering a good opportunity for the returns.

Apart from equity, we are definitely seeing investment in gold especially after the outperformance of the asset. Further, I have also observed investors exploring new ways of investing like peer-to-peer lending. We have seen a good spike in the lender base in our 5paisa Loans vertical, owing to its potentials to give higher fixed monthly returns. This new platform is witnessing good growth.

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