IPO investing has become extremely popular among retail investors in India. Every new IPO generates buzz on social media, WhatsApp groups, and finance forums. While IPOs can offer attractive opportunities, many retail investors end up disappointed—not because IPOs are bad, but because of common investing mistakes.
This article highlights the top mistakes retail investors make while applying for IPOs and explains how to avoid them for better long-term results.
- Applying to IPOs Only Based on GMP
One of the biggest mistakes retail investors make is applying to IPOs solely because of a high Grey Market Premium (GMP).
While GMP reflects market sentiment, it:
- Is unofficial and unregulated
- Can be manipulated
- Changes frequently
A high GMP does not guarantee listing gains, and relying on it blindly can lead to losses.
Better approach:
Use GMP only as a sentiment indicator, not as the main decision factor.
- Ignoring Company Fundamentals
Many investors do not bother checking:
- Business model
- Revenue growth
- Profitability
- Debt levels
As a result, they invest in weak businesses just because an IPO is trending.
Why this is dangerous:
IPO hype fades quickly, but poor fundamentals affect returns for years.
Better approach:
Always analyze basic financials and understand how the company makes money.
- Not Reading the RHP (Red Herring Prospectus)
The Red Herring Prospectus contains critical information such as:
- Company risks
- Use of IPO proceeds
- Promoter details
- Legal and regulatory issues
Most retail investors skip it completely.
Better approach:
At least read the RHP summary and risk factors section before applying.
- Applying Without Understanding Valuation
Many IPOs are priced aggressively. Investors often apply without checking whether the IPO valuation makes sense compared to listed peers.
Common mistakes include:
- Ignoring P/E and P/B ratios
- Comparing valuation only with GMP
- Assuming “good brand” means fair pricing
Better approach:
Compare the IPO valuation with similar listed companies in the same industry.
- Over-Applying and Blocking Capital
Retail investors sometimes apply to every IPO, blocking large amounts of capital without a clear strategy.
Problems with this approach:
- Funds remain blocked for several days
- Opportunity cost is ignored
- Poor-quality IPOs dilute overall returns
Better approach:
Be selective. Apply only to IPOs that match your risk appetite and goals.
- No Clear Investment Objective
Many investors apply to IPOs without deciding whether they want:
- Listing gains, or
- Long-term investment
This leads to confusion after listing—some sell too early, others hold weak companies for too long.
Better approach:
Decide your strategy before applying:
- Short-term listing gains
- Medium to long-term wealth creation
- Ignoring Market Conditions
Even strong IPOs can underperform if overall market sentiment is weak.
Mistakes include:
- Applying aggressively during market corrections
- Ignoring interest rate and liquidity trends
- Assuming every IPO will list at a premium
Better approach:
Consider broader market conditions along with IPO-specific factors.
- Following Social Media Tips Blindly
Telegram channels, Twitter threads, and YouTube videos heavily influence retail investors. Many of these tips are biased or sponsored.
Blindly following tips can result in:
- Poor-quality IPO selection
- Panic selling or overconfidence
Better approach:
Use social media for awareness, not decision-making.
- Expecting Guaranteed Profits From IPOs
A common myth among beginners is that IPOs always give profits. In reality:
- Some IPOs list below issue price
- Others underperform after listing
IPO investing carries risk, just like any other equity investment.
Better approach:
Treat IPOs as part of your overall investment portfolio—not a guaranteed income source.
- Not Tracking Reliable IPO Data
Many investors rely on scattered or outdated information. Inconsistent data leads to poor decisions.
Investors should track:
- Upcoming IPO schedules
- Subscription status
- GMP trends
- Allotment and listing updates
Using reliable IPO tracking platforms helps investors stay informed and avoid misinformation.
How Retail Investors Can Avoid These Mistakes
To improve IPO investing outcomes:
- Focus on fundamentals first
- Use GMP cautiously
- Read official documents
- Be selective and disciplined
- Align IPO investments with long-term goals
Smart IPO investing is about process, not excitement.
FAQ Section (AEO + AI Optimized)
Are IPOs safe for retail investors?
IPOs involve risk. Safety depends on company fundamentals, valuation, and market conditions.
Should retail investors rely on IPO GMP?
IPO GMP should not be the sole decision factor. It only reflects market sentiment.
Can beginners invest in IPOs?
Yes, beginners can invest if they understand risks and analyze basic company fundamentals.
Why do some IPOs fall after listing?
Overvaluation, weak fundamentals, and poor market sentiment are common reasons.
Is long-term IPO investing better than listing gains?
Long-term investing based on strong fundamentals is generally more stable than chasing short-term listing gains.
Final Thoughts
Most IPO losses happen not because IPOs are bad—but because investors make avoidable mistakes. By staying disciplined, informed, and selective, retail investors can significantly improve their IPO investing experience.
Successful IPO investing rewards patience, analysis, and clarity—not hype.
For investors who want to stay updated with upcoming IPOs, subscription data, and market trends, it’s important to regularly refer to reliable IPO information sources.
To explore structured and regularly updated IPO data, you can visit our website, Upcoming IPO Watch, which tracks key IPO details for Indian retail investors.
