The Great Indian Lottery is going on, but not all are aware of it yet!

 

image courtesy: https://www.angelone.in/knowledge-center/ipo/what-is-ipo

The Great Indian Lottery is going on, but not all are aware of it yet!

 

Many born in the yesteryears have tasted the lure of lottery. More than the money, it is the hope as the reward, with which the lottery ticket is bought.

 

Lottery is generally banned in India except for some states. So, what lottery I am talking about here? It is nothing but the great Indian IPO lottery. This lottery is more than hope, it can make real money for you, more than you are ready to accept.

 

This lottery is not accessible to all. One needs to have a bank account, demat account and a trading account. Also, one needs to have smart phone and an internet connection, so that one can access all three accounts through the phone. Then, it is a few finger tip touches, no need to sweat, except follow the IPO calendar religiously.

 

There is a way to participate in these IPOs without having to take risk. How? One will blindly invest in all the IPOs that are oversubscribed (say at least three times) by the last day of application. Within a week, the IPO allocation happens based on lottery. One may get allotted only 5-20% of the times. If allotted, the allotted shares appear in your demat account, and your stock trading account also shows the allotment in your portfolio.

 

To manage the risks, you do not keep your allotments. You simply sell on day one of listing, the stock gets listed at 10 am on the listing day.  Usually, the listing price is the original allotment price plus the prevailing grey market price. Upon listing, the script may go up or down, but you get enough five minutes to complete the trade.  Recent demat accounts ask for TPIN and OTP, therefore your hurried sale may beg for patience, and the delay may benefit you or not.

 

With an average of two such IPOs per week, one gets to apply for at least 100 ipos in an year, assuming there is 5-20 allotments among them, the profit on day one selling could be anywhere between 15 to 150%, let us take an average of 50% here. So, if your investment size is approx. Rs. 1 lakh, then your profit is on average Rs. 50K, and depending on your lottery luck, you may make anywhere between Rs. 2.5 Lakhs to 10 Lakhs per year on day one selling, let us take this as an average of Rs. 5 lakhs per head. Those who can afford to have more cash in the bank, can participate as an HNI, by investing more than Rs. 2 lakh per IPO, so the returns also could be larger.

 

Here, having a larger family helps. If you are a couple with two kids who are major, you can apply in everyone’s name, and increase your family’s lottery chances significantly.  Only thing is that each one needs to have a bank account, demat account and a trading account, all accessible from their smart phone.

 

Do not become greedy and attempt to apply more than once for the same person through different channels. The automation catches you red, gets you red flagged, and you will miss the lottery altogether.

 

You need to become good in cash management in your bank account. Typically, one needs Rs. 5 lakh cash in the bank account to fully exploit the IPO opportunities in a week. Your money gets held in an escrow by the bank, and the money gets deducted only upon allotment. So, upon non allotment, held money gets released and becomes ready for next IPO. Allotted money gets released in the trading account once you sell the shares on day one. You may need 2-3 days to transfer that cash back to the bank account.

 

What if you can not afford Rs. 5 lakhs per head? It is even worth taking personal loan, as your interest cost of 14% gets more than compensated by approx. 100% return over an year. (Do not take loans if you can't handle the risks associated. This advice is only for those who have the confirmed ability to repay the loan in case of setbacks!)

 

It is idiotic to sell some good scripts on day one. But accept that you are an idiot and follow the idiot rule, which is not to take risk as to judging which is worth holding and which is not.  There are some scripts which have become one third past IPO and some three times past IPO, you can’t take chance with your limited knowledge and experience, hence sell on day one. Also, your cash is limited in your bank account, so you need all the cash back into your account as fast as possible.

 

I missed this golden opportunity for last two years, being cash strapped until recently. But now I am enjoying the ride and make some easy money through retirement. You know my nature, I have a big mouth, hence this blog.

 

There is so much criticism around Modi promising Rs. 15 lakhs to common man’s account and not doing so. But, he has facilitated this more than promised, through indirect means. This IPO opportunity is one such, which will last at least next two to three years. So, don’t look for blame games and excuses, get on with it exploiting the great Indian digital revolution and the consistently growing Indian economy.  Wake up and take action! Sooner the better!!

 

Apologies to all those exploiting this game so far, as your lottery chances will now reduce, as more and more will jump into the wagon!

 

Best regards,

Nataraja Upadhya

Word of caution: Wherever genuine opportunities emerge, fraudsters lurk. Be wary of SME IPOs, as the punters can jack up the ipo applications, and on day one of listing, they can sell quickly to cause lower circuit, and you will end up losing money on allotment in such cases. Look for IPO rating, a good ipo will have a rating of 45 or above. 

As a risk management measure, skip all SME IPOs.

Statuary Disclaimer: Investing in stock market has its risks, so take decisions responsibly with your own assessments.