How to Sell IPO Shares: Strategies, Timing & Important Considerations

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Investing in an Initial Public Offering (IPO) can be exciting, especially if the stock performs well on the listing day. But many investors have one big question: how to sell IPO shares, and when is the right time to do it?

This detailed guide outlines everything you need to know about selling IPO shares, including various strategies, the ideal time to sell, and other important considerations.

How to Sell IPO Shares: Insightful Strategies

Let's take a look at some insightful strategies to help you decide how to sell your IPO shares:

1. Sell on Listing Day for Quick Profits:

A significant number of investors choose to sell their IPO shares on the very day they are listed. This approach works best when the stock debuts at a premium over its issue price, allowing you to book immediate profits. However, listing-day trading can be volatile, so this strategy is often chosen by investors who want quick returns without waiting for long-term performance.

2. Selling Enough to Cover Your Expenses:

Another popular method is to sell only a portion of your allotted IPO shares, just enough to recover your initial investment or related expenses. This way, you safeguard your capital while keeping some shares invested in case the stock continues to rise in the future. It’s a balanced strategy for those who want to reduce risk while still participating in potential growth.

3. Selling in Instalments:

If you are unsure about the stock’s direction after listing, selling in instalments can be a smart move. Instead of exiting fully at one price point, you sell small portions over time. This helps you average your returns and manage risks more effectively, especially in volatile market conditions where prices may fluctuate widely in the weeks following the IPO.

4. Selling 50% Upfront and 10% Each Quarter:

For investors who want a structured and disciplined approach, selling half of the shares on listing day and then gradually selling 10% every quarter can be effective. This method allows you to capture short-term listing gains while keeping a portion invested for long-term opportunities. It combines immediate profit-taking with gradual exposure to the company’s potential growth story.

When Can You Sell IPO Shares?

You can sell IPO shares as soon as they are listed on the stock exchange and become available for trading in your Demat account.

Mainboard IPOs: Shares are typically listed on the 6th working day after the IPO issue closes.
SME IPOs: The timeline can differ slightly, but the process is similar.

Once the shares are listed, you can place a sell order through your trading account during regular market hours.

Important Note:

As retail investors (like you and me), we can sell our shares on the listing day without any restrictions.
Anchor investors, promoters, or institutional investors may have a lock-in period that prevents them from selling immediately.

Things to Keep in Mind Before Selling IPO Shares

Before selling your IPO shares, it's important to keep certain things in mind:

Risk: IPO shares can be highly volatile after listing. Prices may jump at the opening but fall later, or a stock that lists low might recover with time. Assess your risk tolerance before making a decision.
Tax Implications: Selling within one year attracts a short-term capital gains tax of 20% on your profits. If you hold the shares for more than a year, you become liable for a long-term capital gains tax of 12.5% on profits exceeding ₹1.25 lakh. It is crucial to plan your selling timeline with these tax implications in mind.
Restrictions to Sell: Retail investors are usually free to sell on the listing day. However, anchor investors, promoters, or institutional buyers may face a lock-in period that prevents immediate selling.

Conclusion

Selling IPO shares is all about aligning your strategy with your financial goals, market outlook, and risk appetite. Whether you choose to book quick profits on listing day or hold your shares for long-term growth, planning ahead and understanding the risks, taxes, and restrictions will help you make smarter decisions.

FAQs

1. Can I sell IPO on the listing day?

Yes, retail investors are allowed to sell their IPO shares on the listing day as soon as the stock begins trading on the exchange. There are no restrictions for them.

2. What is the IPO listing time on the listing day?

Trading usually begins at 10:00 AM on the NSE and the BSE. However, the exact time an IPO lists can vary slightly, as it depends on the specific exchange and the company.

3. Do I need a demat account to sell IPO shares?

Yes, to hold and sell IPO shares, you must have a Demat account. It's a mandatory requirement, as you cannot receive your allotment or place a sell order without it.

4. What happens if I don’t sell IPO shares on the listing day?

If you don’t sell on the listing day, the shares remain in your demat account, and you can sell them later anytime during market hours, just like regular stocks.