Zerodha CEO Reveals Secret to Boosting IPO Gains: How to Sell Stocks at Higher Prices

Investors in the Indian stock market have been witnessing a surprising trend lately - many recent initial public offerings (IPOs) have been gaining significantly after listing. But what's driving this upward movement? Nithin Kamath, CEO of online brokerage platform Zerodha, has shed some light on the possible reasons behind this phenomenon.

Technical Factors at Play

According to Kamath, while demand and supply factors are obvious reasons for the share price movement, there are other technical factors that could be fueling the rise. One such factor is the attempt by traders to short these IPO stocks during the intraday session, anticipating a fall. However, if the stock price hits the upper circuit level, these traders get trapped with no buyers to offload their holdings, leading to a short delivery.

Understanding Short Delivery

A short delivery occurs when the exchange is unable to deliver shares purchased to the demat account because the seller failed to do so. In such cases, the stock exchanges carry out an auction session the next day to settle the trades. These auctions can be at a significant premium to the market price of the company shares. For instance, the auction price for Meesho was ₹258, while the market price at the time was around ₹226.

Exiting Stocks at Higher Gains

Kamath highlighted that selling holdings through the short delivery-auction session round is a great way to exit positions at a potentially higher price. If investors are holding stocks in companies that are going through an auction window, they can offer their shares directly at a likely higher price than the current market price. This feature is enabled on Zerodha's trading platform, allowing investors to take advantage of this opportunity.

Key Takeaways

• Many recent IPOs have been gaining significantly after listing due to technical factors such as short delivery.
• Traders attempting to short IPO stocks can get trapped if the stock price hits the upper circuit level, leading to a short delivery.
• The auction session to settle short delivery trades can be at a significant premium to the market price.
• Investors can exit their positions at a potentially higher price by selling their holdings through the short delivery-auction session round.

Remember, this is a perspective, not a prediction. Investors should always do their own research and consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.