This part of the blog is for only and only those who have appetite for some risk on equity investing. Investing in high demand IPOs using ASBA and selling on listing is another way to enhance savings accounts returns with some measured risk.
So, your surplus funds are now earning 6-7% compared to 3.5% earlier (if not, read more on this here – https://blog.multipie.co/2021/01/18/how-to-enhance-your-liquid-idle-fund-returns/).
Now, how do we move to around 10% in 2021 ? We assume here that there will be IPOs happening in 2021 (pre-requisite)
Invest money in IPO’s using ASBA (Application Supported by Blocked Amount). You may convert existing savings account to an ASBA account thus ensuring that you continue to earn interest on the entire amount bid in IPO.
The amount is only blocked and does not leave your account. It only leaves your account in case you get allotted shares in the IPO. The more oversubscribed an IPO is the less likely you are to get allotted shares. Hence for IPOs already highly oversubscribed, you can put bigger amounts on last day.
So, how do we execute this strategy?
We suggest the following steps before investing in an IPO:
Below is the list of IPOs in 2020 which cumulatively generated a return of 4.3%.
Listing gains above are calculated on amount bid. % Gains on amount actually allotted are higher as amounts allotted are low.
Immediate IPOs are
Indian Railway Finance Corporation (Jan 18th -20th) : We do not have a positive view.
Indigo Paints (Jan 20th – 22nd) : We are positive. Check the multipie blog on Jan 22 for final view after we factor in last grey market premium and updated level of oversubscription
Home First Finance (Jan 21 to Jan 25) : We are positive. Check the multipie blog on Jan 25 for final view after we factor in last grey market premium and updated level of oversubscription
Brookfield REIT (later this month) : Currently, we are positive. Final view will be there on last date of IPO on multipie blog on last day of IPO
Again, do this only if you have some appetite for equity risk.
Note : SBI Cards above gave minus 13% returns on listing. An investor would have – 13% / 44 = minus 0.3% on amount bid for as it was oversubscribed 44 times. Markets crashed in March 2020 in the one week gap between application date and listing date
If you had bid for 10 lacs in Reliance Power in Feb 2008 using above strategy, you would have got an allotment of 10 lacs / 190 equal appx 5,000 rupees only as it was oversubscribed 190 times. It had listing gain of 21% and you would have made 1000 Rs. if you sold on listing. If you held on, the 5000 Rupees allotment would become close to zero very soon.
In general, if done in below disciplined way
Ia) IPOs chosen well (high grey market premium, high oversubscription)
b) sold immediately on listing (basically one week risk)
This strategy should give a return enhancement on the savings a/c return for those having some short-term equity risk appetite.
Do let us know in the comments section what you think about this strategy and any other topics on investing you’d like us to cover.