Archive · 5 Oct 2026
How IPO Mutual Funds Buy and Sell Shares, Experts Explain
IPO mutual funds invest in companies that have recently offered shares to the public.
A manager can sometimes buy shares before trading begins as an anchor investor, apply during the IPO, or buy shares after they start trading.
The manager researches the company and considers whether its share price is reasonable.
Because a new company has little trading history, the fund may begin with a small investment.
It can hold shares if the business remains promising, or sell if the price seems too high or the company’s prospects weaken.
These funds do not buy shares through pre-IPO placements, according to the article.
Some funds are actively managed, while others follow an index.
Experts say investors should check what the fund owns and consider it a small part of an overall equity portfolio.
IPO-focused funds may buy shares as anchor investors, during public subscription, or after listing on the stock market.
A fund manager may study offer documents, management, financials, promoters, and valuation before investing.
Managers can start with smaller allocations and adjust positions as a newly listed company’s business and investment case develop.
Sales may follow stretched valuations, weaker prospects, governance concerns, or a changed investment thesis; high portfolio turnover is not automatically positive.
Experts advise treating IPO funds as a small portfolio addition and reviewing holdings, sector exposure, concentration, valuations, and strategy.
- Who
- IPO-focused mutual fund managers and investors; experts quoted include Uttam Agarwal, Manish P. Hingar, and Piyush Jhunjhunwala.
- What
- An explanation of how IPO-focused mutual funds buy and sell shares and what investors should assess.
- When
- Shares may be bought before an IPO opens to the public as anchor investors, during IPO subscription, or after listing.
- Where
- In IPO markets and, after listing, on the stock market.
- Why
- To explain how these funds make investment and exit decisions and how investors can evaluate them.
Reasons to Hold
Reasons to Sell
Company performance and valuation
Reasons to Hold
A manager may stay invested when the business continues to perform and its valuation remains reasonable.
Reasons to Sell
A manager may sell if valuation runs ahead of expected earnings growth or business prospects weaken.
Investment thesis and turnover
Reasons to Hold
A manager can retain a stock while its investment case remains intact; a rise in price alone does not necessarily justify selling.
Reasons to Sell
Governance concerns, poor earnings visibility, weaker cash flows or operations, or a changed investment thesis may prompt an exit. High turnover is not inherently positive.
- Active fund example
- Edelweiss Recently Listed IPO Fund
- Passive fund example
- Mirae Asset BSE Select IPO ETF FoF
- Pre-listing access
- Funds can participate as anchor investors; those shares are subject to a lock-in period.
- Public subscription
- Mutual funds can apply for IPO shares alongside other institutional investors.
- Post-listing access
- Funds can buy shares on the stock market after a company is listed.
- Pre-IPO placements
- The article says mutual funds cannot buy through pre-IPO placements, citing a SEBI notification.
- SME IPOs
- Whether a fund can invest in SME IPOs depends on its mandate.
- Portfolio role
- Experts recommend viewing an IPO fund as a small addition to an equity portfolio rather than a core holding.