Every IPO brings the same steps. A new issue opens, the subscription numbers start rising, and suddenly your cousin who has never opened a demat account in his life is asking you which IPO to apply for. There is something about IPOs that makes even otherwise-careful investors throw caution. Maybe it’s just FOMO dressed up as an investment strategy.<\/p>\n\n\n\n
So many people who lose money or miss allotments in IPOs are not unlucky. They are making the same mistakes over and over, year after year, IPO after IPO. <\/p>\n\n\n\n
Let us go through the common IPO investing <\/a>mistakes that retail investors often make, which need to be avoided one by one, so you do not have to learn these lessons the expensive way.<\/p>\n\n\n\n You know the feeling. As soon as the IPO opens, subscription figures are flashing 50x, 60x, and somewhere in your head a voice says “everyone cannot be wrong, right?”<\/p>\n\n\n\n Subscription numbers tell you what the crowd is doing. They say nothing about whether the company’s financials are sound. Before applying, at least skim through the Red Herring Prospectus, specifically the risk factors and financial statements sections because companies are legally obligated to disclose things like pending litigations, promoter share pledges, and related-party dealings in there. 15 minutes with that document has saved more portfolios than any GMP <\/a>website ever will.<\/p>\n\n\n\n Grey Market Premium is considered like an official forecast, when it is just an unregulated number floating in an unofficial market that SEBI does not track or verify. It can shift by the hour based on rumour, sentiment, or a handful of large trades. Plenty of investors have applied for an IPO because the GMP looked attractive, only to watch it shrink, or vanish entirely, by the time listing day arrives.<\/p>\n\n\n\n Use GMP as one small data point if you want to, but never as the reason you are applying.<\/p>\n\n\n\n Usually GMP is most talked-about when hype is at its peak, which is when it is least reliable. By the time an issue closes for subscription, that number has often been inflated by traders operating in an unofficial market. None of this is necessarily illegal, but it is also not something SEBI backs or regulates in any way. <\/p>\n\n\n\n Price bands always tell a story: huge addressable market, aggressive growth projections, first-mover advantage. All this sounds great. But growth potential is very low if you are paying 40 times earnings for a company whose already-listed competitors trade at 15 or 18 times. <\/p>\n\n\n\n A quick look at P\/E ratios, EV\/EBITDA multiples, and return ratios against listed peers in the same sector tells you far more than any investor presentation will. <\/p>\n\n\n\n This one step alone separates people who actually evaluate a business from people who are just riding a wave.<\/p>\n\n\n\n Retail investors, HNIs, and employees all fall under different allotment categories, and each works differently. Retail applications are capped at \u20b92 lakh. If you even push a little over that without realising it, your application will slide into the HNI category, where the competition and allotment math are completely different and much tougher.<\/p>\n\n\n\n This mistake sounds stupid until it happens to you. Double-check your category before you hit submit. <\/p>\n\n\n\n A day before an IPO opens to the public, a chunk of shares gets allotted to anchor investors, big institutional players putting money in advance. Checking who these anchors are, how much they have committed, and at what price gives you an understanding of how informed money views the company. <\/p>\n\n\n\n If well-known domestic mutual funds or insurers are missing from that list, it is not necessarily a dealbreaker. Smart money does not always get it right, but it usually does more homework than the average retail applicant, and its presence or absence is public information available for anyone willing to look before applying blind.<\/p>\n\n\n\n There is a pattern that plays out again and again: a stock lists well, climbs for a few weeks, and then quietly starts sliding once the anchor investor lock-in period ends, which is usually 30, 90, or 180 days after listing. When those large blocks of shares are ready to sell, early investors often book profits, and that fresh supply puts pressure on the price. <\/p>\n\n\n\n Investors who bought on listing-day excitement frequently forget this and get blindsided a few months down the line when the stock corrects for reasons that have nothing to do with the company’s real performance.<\/p>\n\n\n\n \u201cI will figure it out once it lists” sounds flexible, but it is just a decision to let emotion drive the brain later. Without a target price or a mental stop-loss set in advance, you are far more likely to either sell too early out of fear or hold on too long out of greed once the stock starts moving on debut. <\/p>\n\n\n\n Decide ahead of time whether you are in this for a quick listing-day gain or a longer-term hold tied to the company’s fundamentals. Placing a GTT order in advance, if your broker supports it, takes emotion out of the equation.<\/p>\n\n\n\n The ASBA mechanism blocks your funds the moment your application goes through, and they stay blocked until allotment or refund comes through, which can take several days. It is easy to get carried away applying for two or three IPOs at once without accounting for the fact that this money simply is not available to you during that window. <\/p>\n\n\n\n If an emergency comes up, or another investment opportunity appears, you might find yourself short on liquidity at that point in time. Only apply with money you are fine parking for a few days.<\/p>\n\n\n\n This one gets overlooked constantly, but it matters. A slow app, a delayed UPI mandate approval, or a confusing category selection screen can cost you an allotment, especially in high-demand IPOs where subscription can close within hours and every minute of delay counts. <\/p>\n\n\n\n A reliable, SEBI-registered broking platform makes a real difference here. Pocketful<\/a>, for instance, keeps the IPO application simple, with a clean view of upcoming issues, GMP trends, and a UPI-based ASBA<\/a> flow that doesn’t leave you guessing at the last minute.<\/p>\n\n\n\n This is something a lot of people just don\u2019t think about, but it probably should be one of the first things you look at. Every IPO is structured as either a fresh issue (new shares are created, and the money raised goes into the company itself for expansion, debt repayment, or working capital) or an Offer for Sale, or OFS (existing shareholders, usually promoters or early investors, are simply selling their stake, and the company doesn’t see a rupee of that money).<\/p>\n\n\n\n A lot of IPOs are a mix of both. If an IPO is almost entirely OFS, it basically means early investors and promoters are cashing out, and the company itself is not raising fresh capital for growth. <\/p>\n\n\n\n You will find this split clearly mentioned in the RHP, along with exactly how the fresh issue proceeds are planned to be used. It takes about two minutes to check.<\/p>\n\n\n\n Read Also:<\/strong> What Are the Different Types of IPO Investors<\/a><\/p>\n\n\n\n1. Paying Attention to the Hype <\/h3>\n\n\n\n
2. Trusting GMP a Little Too Much<\/h3>\n\n\n\n
3. Not Checking the Valuations <\/h3>\n\n\n\n
4. Applying in the Wrong Category <\/h3>\n\n\n\n
5. Skipping the Anchor Investor List <\/h3>\n\n\n\n
6. Forgetting the Lock-in Period <\/h3>\n\n\n\n
7. Not Deciding Your Exit <\/h3>\n\n\n\n
8. Locking Up Money You Might Actually Need <\/h3>\n\n\n\n
9. Not Paying Attention to the Broker You Are Applying Through <\/h3>\n\n\n\n
10. Not Checking Whether It’s a Fresh Issue or Pure OFS<\/h3>\n\n\n\n