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What is Cutoff Price in IPO Application: Why Bid at Cutoff Price?

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what is cut off price in ipo

Many times investing in the primary stock market gives lucrative returns in short time period compared to the secondary market. Yes, bidding at the initial public offer (IPO) can you give multiple times returns but biding at right price is important to get the allotments.

Actually, in IPO the shares are offered within the price range and investors are required to bid within that range. Do you know at which price you should bid to become eligible for the allotment of shares, so that you can enjoy listing gains? 

Actually, while applying to IPO through your broker, you will get options to bid between the floor prices to the upper price range or at cut-off price.  In this article we have discussed cut-off price and why you should bud at cut-off-price. 

What is Cut-Off Price in IPO?

Used in the initial public offer (IPO) Cut-off price is the offer price decided by the share issuing company with the help of book running lead managers and IPO consultation. Compare to the price band, the Cut-off price could be any price within the price band.

Actually, in an IPO launched through the book-building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. And Cut-off price is different from a floor price, which is the minimum price at which inventors can bid.

Why You Should Bid on Cut-off price?

As, I’ve already told you cut-off price is decided by the issuer and lead managers after considering the book and investors’ appetite for the stock.

If you bid at cut-off-price it indicates that you are willing to apply for the IPO or subscribe to the shares issued at any price decided by the Merchant bankers within the price band through the book-building process.

In an IPO all the eligible employees bidding in the employee reservation portion and retail individual Investors are entitled to bid at the cut-off price. While on the other hand all the other types of investors like QIBs (including anchor investors) and non-institutional investors are not entitled to bid at the cut-off price. 

Also Read: How to Increase Chances of Getting Shares in IPO: Allotment Tips

The best advantage of bidding at cut-of-price is that unlike price bids, where a specific price can be invalid if the price indicated by the applicant is lower than the price discovered, the cut-off bids always remain valid for the purpose of allotment.

Example to Bid at Cut-off-price

IPO Price Range: Rs. 250-260

You Applied 10 Shares at Rs 255

If Shares Issues at Rs. 253 (you will receive allotment at Rs. 253)

If Shares Issues at Rs. 257 (you will not receive allotment)

If applied at Cut-off-price (you are eligible for allotment at any determined issue price).

Also Read: How to Check IPO Allotment Status on NSE BSE & ICICI DIRECT

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Stock Market

How to Increase Chances of Getting Shares in IPO: Allotment Tips

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tips for ipo allotment

An oversubscribed IPO means investors are willing to invest in the shares of a company having promising business growth prospects and can give lucrative returns in the stock market. And in such cases most IPO applicants including retail investors not get the allotment to become disappointed with the money returned into their account.

If you are one of them not get the shares in IPOs, you need to read this article to know how to ensure IPO allotment. Actually, when an IPO is oversubscribed multiple times, the chances are very low, but if you follow the rules discussed below you will maximize your chances of getting an allotment and enjoy the lucrative returns in the short-term.

5 Tricks & Tips for IPO Allotment

Tricks & Tips for IPO Allotment

#1 Fill the Correct Details in the Form

The first criterion of rejecting the IPO applications is incomplete or mismatch information provided in the form. So make sure while filling the IPO application form fill all the details like your name, PAN & Demat Number, etc. to become eligible. 

#2 Apply with Multiple Demat Accounts

You cannot apply multiple applications in an IPO using the same PAN number, if you do this, your first application could be also rejected. But you can open multiple demat accounts in the name of your family members and friends. 

Yes, applying through multiple accounts increases the change of allotment significantly in case of oversubscribed IPO. For example, if an IPO is oversubscribed 5 times, your chances of getting the allotment are 20%. But if you apply in the IPO using 5 family members’ names, there is a high chance that you will get an allotment in any of the applications.

#3 Always Bid at Cut-off Price

IPOs offered with the book building process have price bands and you have to bid for either bid for upper band limit or opt for cut-off price. If you bid at a lower bid price your application could be rejected or would be not eligible for the allotment.

Also Read: What is Cutoff Price in IPO Application: Why Bid at Cutoff Price

#4 Avoid Last Moment Subscription

Some investors wait for the subscription levels in HNI, QIB and retail categories before placing their bids. If the response is good then they are placing their bids on the last day. But if you are going to apply it on the last day but it might cause few issues like your bank account or net banking is not responding due to HNI and QIB high subscription.

#5 Buy Shares of Parent Company

Yes, this trick could be also workable if the IPO issuing company’s parent or holding company is already listed and giving a reservation to existing shareholders. If you have a few even single shares of a parenting company you would be eligible to apply for IPO and sometimes IPOs are offered at a discounted price to existing shareholders.

Reason for Not Getting IPO Allotment:

  1. Your application was not considered as valid i.e. invalid PAN No. or invalid Demat account number or multiple applications submitted from the same name.
  2. Your name was not selected in the lucky draw for allocation of shares (in case of huge over-subscription).

Let me tell you one thing, in oversubscribed IPOs, it is not confirmed that you will get the allotment of shares. As there are different types of allotment criteria, few of them follow the lucky draw and few companies go through the Pro-rata basis to make sure every investor can assuredly get the same amount share into their Demat account.   

In fact, luck draw is the most common reason and applied to 90% of the applicants for not getting shares. In all good IPO’s, due to oversubscription, the lucky draw process is followed and all investors don’t get allotment or get full allotment.

Also Read: How to Check IPO Allotment Status on NSE BSE & ICICI DIRECT

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Stock Market

How to Check IPO Allotment Status on NSE BSE & ICICI DIRECT?

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how to check ipo allotment

Applying in the Initial Public Offering (IPO) can be a profitable bet compare to buying the shares from the stock market. Yes, shares having potentials and offered at fairly priced at discounted rates surely get a positive response by investors and can give you the high returns on the listing with an option to monetize your shares on that day.

And if you regularly apply for the IPO or applied for an IPO at the cutoff price, you can check your share allotment status before the listing day. Actually, after IPO closure day when the company decides the allotment process, the money is refunded to the applicants. So you can check here the various ways to check IPO application status. 

How to Check IPO Allotment Status Online?

How To Check IPO Allotment Status BSE:

Step1: First of all visit at BSE India.

Step2: Here you will see two types of issues, just select “Equity”.

Step3: Now select issue name- ‘Company Name’.

Note: Please note the company will only appear once the allotment is done.

Step4: Now you have to enter your ‘Application Number’ of IPO.

Step5: After that, you have to enter ‘PAN Card No’ and click Search.

How to Check IPO Allotment Status NSE:

Apart from BSE, you can also check IPO status on the national stock exchange (NSE). Just follow the stepwise guidance given below.  

Step1: First of all visit at NSE India.

Step2: Now login with your user name and password.

Step3: If you don’t have registered just create an account.

Step4: Now login with the credentials and select the companysymbol.

Step5: Your PAN detail will be visible just enter the applicationnumber and get data.

How to Check IPO Allotment Status in ICICIDIRECT?

If you have a trading account with ICICI Direct you can check IPO application status there also only when you have applied for the IPO from there.

Step1: Login into your ICICI Direct Account.

Step2: Now Navigate to the IPO section.

Step3: Here in IPO Section select order book.

Step4: Now find just below “Status Application No.

Step5: Click here on ‘Executed” and a popup window opens.

Step6: When you click on executed you can see the allotted quantity.

Note: If you have not allotted any share you can see the refund amount.

How to Check IPO Status Online on other Platforms:

On Linkintime

Step: First of all visit the Linkintime website click here.

Step2: Now click on the drop-down and ‘Select Company’.

Step3: Just enter your PAN card detail correctly.

Step4: Now enter the captcha and click on submit.

Once you fill all the required details and submit you will your name along with the status of your IPO application showing the total securities you have applied and securities you have been allotted. If IPO is oversubscribed multiple times, there are lesser chances of allotment as in such situations it is not possible to get confirmed allotments.    

Also Read: How to Increase Chances of Getting Shares in IPO: Allotment Tips

However, if you have bid at less than the higher band or not cutoff price and the company decided to issue IPO at a lower band then you would be not eligible to get the allotment. Because first of all such applications are rejected then allotment is done.

Also Read: What is Cutoff Price in IPO Application: Why Bid at Cutoff Price

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How Sentiment Analysis in Stock Market Used for Right Prediction?

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Social Media Contents Based Sentiment Analysis and Prediction System

The stock market is one of the most sensitive fields, where sentiments of the people can change the trend of the entire market. Actually, there are many factors, affect the movement of the stock market and, the sentiments of the traders are also one of them drive the market.

At the present time, stock market investment plays an inevitable role in the finance sector, as high stock market value is considered as the parameter of high economies. The volatile nature of the stock market has equal chances for earning money and losing money as well. But if the situation can be predicted, investors can make a profit or minimize their losses. 

Hence, AI companies are now using sentiment analysis in the stock market to predict the market trend or movement of a particular stock. And social media is one of the best platforms to understand the sentiments of the people trading or investing in the stock market or other financial instruments that are traded on the various exchanges.

What is Sentiment Analysis and How it Works?

Sentiment analysis is basically the process of analyzing the sentiments of people through various platforms like social media and similar websites, where people can freely express their feelings and opinions about anything they think.  

What is Sentiment Analysis and How it Works

And classification of such sentiments can be done at the phrase level, sentence level, and document level. The sentiment analysis uses Natural Language Processing (NLP) to divide the language units into three categories: Negative, Positive and Neutral.

Sentiment Analysis in Social Media

Facebook, Twitter, and Linkedin are the leading social media networking sites, where people share their opinions and express their feelings that show their sentiments. Here people also discuss what they think whether they are experts in that field or not. 

sentiment analysis stock market

And access to social media platforms through portable devices like smartphones is making easier for the people to post the contents and spread their views on various topics. And here sensitive news including fake news or rumors also spread at a very fast pace

Such news or information influences the people around the globe and if the news is from the stock market, investors will be also influenced and they will take the decision of buying or selling of stock accordingly, that will have a positive or negative impact on the price of the stocks trading on exchanges.

How Sentiments Analysis Used in Stock Market Prediction?

Actually, sentiment analysis and the stock market is a well-researched problem. As there are already lots of forces behind the movement of the stock market or particular share of a company. Maybe due to negative sentiment, the stock price goes down or if there is any positive sentiments the stock prices increased because of this optimistic sentiments.

sentiment analysis stock market predicition

Although, there is no single technique to predict the stock movement accurately, so researchers have done lots of experiments to get better results. But due to the universal use of social media websites, they can be considered as important in the prediction of stock movements, as investors share their opinions and thoughts in the media.

And when you analyze such social media platforms or microblogging websites using sentiment analysis you can get some idea what people are talking about and what they think about a particular stock. The contents of Social Media such as posts, tweets, photos are analyzed by people of different communities such as politicians, marketers, and analysts, etc, to make the right decision while investing in such markets.

Social Media Contents Based for Real-Time Sentiment Analysis in Stock Market Predictions

Social media is playing a key role in sentiment analysis on the stock market. Even, over the past few years, the influence of social media sites on everyday life has become so large that even information on large and small incidents or disasters is obtained through social media sites.

And due to the influence social ripple effect of social media sites, diverse studies are in progress to analyze the contents generated online. Social media content analyses are conducted in diverse methods, and for diverse purposes.

Among several contents, especially those texts that are firsthand written by the users contain the most direct and important information. Since contents are created according to the user’s intentions the time of creation time also becomes an important factor in social media contents based on real-time sentiment analysis in stock prediction.

In the current era, the internet user’s popularity has grown fast equivalent to emerging technologies; that actively use online review sites, social networks and personal blogs to express their opinions. And this provides an opportunity to know the positive and negative attitudes about people, organizations, places, events, and ideas.

The tools provided by natural language processing and machine learning along with other approaches to work with large volumes of text make it possible to begin extracting sentiments from social media.

Social Media Impact on the Stock Market

As we can see that in the modern world, people make judgments about the world around them when they are living in the society. They make positive and negative attitudes about people, products, places and events. These types of attitudes can be considered as sentiments.

social media impact on stock market

Sentiment analysis is the study of automated techniques for extracting sentiments from written languages. The growth of social media has resulted in an explosion of publicly available, user-generated content moderation service to control such contents.

While such data and information can potentially be utilized to provide real-time insights into the sentiments of people. Blogs, online forums, comment sections on media sites and social networking sites such as Facebook and Twitter all can be considered as social media that can capture millions of peoples’ views or word of mouth.

Hence, communication and the availability of real-time opinions from people around the world make a revolution in computational linguistics and social network analysis. And with time being, social media is becoming an increasingly more important source of information for anyone including investors trading in the stock markets.

Actually, when a piece of news comes in the market, people start talking about and give their positive or negative opinions that show their sentiments. That can be used by the sentiment analysis experts to predict the movement of the stock market or particular stock of a company.

While on the other hand people are more willing and happy to share the facts about their lives, knowledge, experiences, and thoughts with the entire world through social media more than before any platform of media sources.

Twitter Sentiment Analysis Machine Learning for Stock Prediction

The sentiment analysis task is very much field-specific. Tweets are classified as positive, negative, and neutral based on the sentiment present. Out of the total tweets are examined by humans and annotated as 1 for Positive, 0 for Neutral and 2 for Negative emotions. For the classification of nonhuman annotated tweets, a machine learning model is trained whose features are extracted from the human-annotated tweets.

twitter sentiment analysis machine learning

Such data is extracted from twitter and various other similar platforms, and then used a training data set to train the AI model through sentiment analysis algorithms to predict the price of stocks in different scenarios. Except, in extreme or unexpected conditions, most of the time, machine learning or deep learning-based models predict at very high accuracy helping stock market investors to earn money.    

Summing-up

They actively participate in events by expressing their opinions and stating their comments that take place in society. This way of sharing their knowledge and emotions with society and social media drives the businesses to collect more information about their companies, products and to know how reputed they are among the people and thereby make decisions to go on with their businesses effectively.

To understand the sentiments of people you need an expert, Cogito is providing the sentiment analysis services for the business enterprises, companies and organizations to understand their customers and offer them the most suitable product or services for better response.

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