How I profited almost 300% from two IPO in NEPSE in exactly a month: NEPSE Trading Journey S01E02

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I previously wrote an article about my first investment in NEPSE. I had bought 200 units of Laxmi Unnati Kosh (LUK) at Rs. 10 per unit.

Now, I came to know that mutual funds like LUK are generally not profitable for a short-term trader like me. The unit price is almost always lower than Rs. 10 in most mutual funds. Nevertheless, mutual funds are attractive for someone with a large amount of money and for those who want consistent but lesser dividend payment.

This means that the Rs. 2,000 I invested in LUK is sitting there forever. I ain’t selling it anytime soon.

Anyways, this article is going to be about how I bought two IPOs and profited almost 300% in exactly a month from buying.

The first IPO I bought

I bought 30 units of Liberty Energy Company Limited (LEC). All IPOs in NEPSE are offered at Rs. 100 per share. Thus, I only put Rs. 3,000.

Everyone I met was talking about how hydropower companies are losing and their IPO shares can trade at below Rs. 100 from the very first day of listing.

However, I could sell the 30 shares of LEC at Rs. 300 per share on the first day of trading, i.e. yesterday (Bhadra 04, September 20).

But I might have been lucky this time because of the ongoing bull market. Liberty’s stock plunged immediately after I sold, ultimately getting the 10% negative circuit on its first day. There were no buyers and huge sell orders were piling.

Take your financial decision with due diligence, please. Your friends are right when they say hydropower companies are losing. In one article where I compare the profits of all the IPOs in the last 10 years, hydropower companies have given the least profits, sometimes even loss.

Anyways, I bought LEC (and that too, friggin 30 shares) because I thought if I become quick on the first few days, I can still get out at some price higher than Rs. 100.

I didn’t expect I would get to sell at Rs. 300 per share, which was the highest upper limit for the first transaction of LEC. It’s pure luck, you guys.

I sold 30 shares of Liberty Energy at Rs. 300 per share.

The second IPO I bought

I bought 10 units of Reliance Life Insurance Company (RLI). NEPSE offers IPOs of all companies at Rs. 100 per share. Thus, I only put Rs. 1,000.

Because of the huge number of applications that this issue received, getting more than 10 was impossible.

RLI is a sound company in its sector. Investor optimism was high towards this company, which was further proved by this IPO issue being the biggest IPO ever in terms of the volume of applications.

Like I said in this article, when a company that has positive market sentiment is listed in NEPSE, it goes through the first phase of bullish frenzy. The company might be good but investors overestimate everything.

Thus, the stock gains continuously for a few days and finally a short-term pullback occurs.

First bullish frenzy and pullback evident in the chart of Nadep Laghubitta. The first candle is its first trading day.

If you can watch the price movement and determine when the bullish sentiment exhausts, you can sell roughly at the peak. You can then come back to this stock after the small pullback and consolidation have finished.

In the case of Reliance Life Insurance, I expected its first phase of bullish frenzy would last for about seven days. However, investor optimism persisted until yesterday, i.e. Bhadra 04, (September 20).

But the stock was gradually losing steam. Until yesterday, a huge amount of buyers (buy orders) were demanding the stock with only a few sellers, which was pushing the price higher.

But the sell orders began to pile in yesterday. This must be because many people who had the stock of RLI thought it was a good time to sell and take profit.

Sensing this increase of supply, I guessed this was the ultimate peak for the first bullish frenzy for RLI. Nevertheless, the stock reached the intra-day high of Rs. 726. Although this is higher than the rate in which I sold, i.e. Rs. 695, I won’t kill myself for it because I still could get out at the approximate peak.

I sold Reliance Life Insurance's shares at Rs. 695 per share.

The stock lost after that, ultimately closing at Rs. 665. After 8 days of continuously closing green, yesterday was RLI’s first red day in which it closed lower than the day’s open.

Clearly feels like the end of an uptrend to me.

The first bullish frenzy in the stock chart of Reliance Life Insurance Company Limited. Notice the first red candle day yesterday.
The first candle is the first trading day of Reliance Life Insurance. I think the bullish frenzy has exhausted. I might be wrong but it doesn’t matter because I’m happy with my returns.

Show me the money

I bought 10 units of RLI and 30 units of LEC at Rs. 100 per share. Thus, I invested only Rs. 4,000 in total.

I sold all shares of RLI at Rs. 695 per share and all of LEC at Rs. 300 per share. Thus, I got Rs. 15,950. Subtracting the initial Rs. 4,000 investment, I profited a pure Rs. 11,950. This is a profit of 298.75%.

I applied for both the IPOs on Bhadra 04. I sold them yesterday on Ashwin 04. Thus, in exactly a month, I got a profit of nearly 300%.

You’re right, I did have a good sleep last night.

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