14 Jun 07 How to apply in an IPO

This post is based on the request of one of the regular readers of this blog. For the past 2 – 3 years there has been a huge bull rally in the indian stock markets which has brought people back to investing in the stock market. A fallout of this capital market bull rally is the tremendous increase in the activity taking place in the primary market (IPO market). Companies are rushing in to tap the capital markets and raise funds through Initial Public Offers (IPO) and Follow onpublic offers (FPO). Though paper work has been considerably reduced, the process of applying in an IPO is still little complicated for people not familiar with investing in the stock market. Here are simple steps to start investing in stock market and IPO’s (primary market)

There are two ways to invest in IPO’s
Online mode
Offline mode

Investing in IPO’s online (through the internet)
This is the simpler of the two methods. To get started in investing in IPO’s you will need to open a demat account cum trading account (To do this you will need a bank account and a PAN number). After opening your demat and trading accounts you will need to login through your trading account and select the IPO you wish to invest in. Transfer funds from your bank account to your trading account. Select the number of shares you want to apply for and the price at which you want to bid for (or use cut off option). If you get the shares allotment, the shares will be credited to your demat account. The IPO refund will be sent by cheque to your postal address or through ECS to your bank account.

Investing in IPO’s offline
Here you will need only the demat account. Trading account is not necessary unless you decide to sell the shares you have been allotted through IPO’s. You will have to visit your nearest broker and get the IPO application form, fill it up and give the filled form along with the cheque to the broker. You will be given an acknowledgement form. If you apply for more than Rs. 50,000 you will need to attach a photocopy of your PAN card with the IPO application form.

Online or offline : Which method should I choose?
It depends. Online mode is more convenient and saves time, effort maybe money too (if you consider fuel cost). But you won’t be able to give a stop payment if you decide to change your mind after applying. If you are doubtful about investing in an IPO, its always better to use the offline mode to invest in that IPO.

03 Jun 07 Online Stock Market Trading in India

Based on my experience, here is a list of some of the best brokerage houses offering facilities for Online Stock Market Trading in India. Online Stock Market Trading has evolved tremendously in India, in the last five years. It is very convenient, comfortable and cost effective way of trading in the stock market. Feel free to share your experiences through comments

Rank 1 : Reliance Money
Rank 2 : Geojit
Rank 3 : Sharekhan
Rank 4 : Kotak Securities
Rank 5 : ICICI Direct

P.S. – I haven’t taken into account the performance / accuracy of equity research and the trading calls that some of these brokerage firms provide for free. I’ve only taken into account safety, brokerage rates and speed of execution. I’ve taken into account only the Online Stock Market Trading facility offered by the above brokerage firms. I haven’t considered their Offline Stock Market Trading facilities.

However, for investing in IPO’s I feel sharekhan is the best, since it allows clients to place orders till 2-3 PM on the final day of subscription of IPO’s.

Disclaimer : This is only my personal opinion. It shouldn’t be considered as a recommendation. Please do your own research before selecting your broker for Online Stock Market Trading.