InvestorQ : How do I start investing ?
Laxman Katta made post

How do I start investing ?

Archita Jajjoo answered.
2 years ago

Since you are looking to start investing in IPO, I have tried covering two majors- How to apply for IPO online and the IPO application process.

Application for an IPO of a company-

IPOs come in 2 varieties viz. Fixed Price IPOs and Book Built IPOs. In a fixed price IPO, the company fixes the IPO price in advance as the sum of the par value and the premium. You can only apply for the IPO at that price. In a Book Built issue, the company will only provide an indicative price range for the IPO and the final price of the IPO will be discovered through the book-building process. Nowadays, most of the IPOs are predominantly through the book building route only.

IPOs have 3 classes of investors’ viz. Retail, HNI and Institutional categories. Investments up to Rs.2 lakhs in an IPO are classified as retail investors. It is beneficial to invest in the retail quota because the allotment methodology is designed by SEBI to ensure that as many retail investors as possible get allotment. Thus, your chances of allotment are much higher in this case. In case of HNIs, the allotment is proportionate while in case of institutions the allotment is discretionary.

You can bid for IPOs through the offline method or through the online method.

In the offline method, the form is filled up in physical form and submitted to the IPO banker or to your broker. In an online application, you can log in the application directly through the trading interface provided by your broker.

ASBA application process is simpler and also more transparent for investing in IPO. Here in ASBA authorize the bank to block an amount equal to your application amount while applying for an IPO.

The advantage in the online IPO - Your data is automatically populated from your trading / demat account thus reducing the clerical effort from your side. That largely simplifies the online IPO application form fill-up process. In fact, IPO online application is the preferred mode.