54 percent of IPO shares sold within a week

Business.Business: More than half of the investors in initial public offerings (IPOs) between April 2021 and December 2023 sold shares within a week of listing, a study by the Securities and Exchange Board of India (Sebi) revealed on Monday. In view of the growing participation of retail investors and increased oversubscription in recent IPOs, the market regulator conducted an in-depth study to analyse investor behaviour in main board IPOs. It found “flipping” behaviour among individual investors who sold 50 per cent of the shares allotted to them by value within a week of listing and 70 per cent by value within a year. The Sebi study found a strong disposition effect, with investors showing a greater tendency to sell IPO stocks that registered positive listing gains, as compared to a tendency to sell stocks that listed at a loss. “When IPO returns were more than 20 per cent, individual investors sold 67.6 per cent of shares by value within a week. In contrast, only 23.3 per cent of shares by value were sold when returns were negative,” the market regulator said.

Almost half of the demat accounts applying for IPOs between April 2021 and December 2023 were opened during the post-Covid period. According to the study, a total of 144 new companies made their stock market debut through main board IPOs in the period between April 2021 and December 2023. At least 26 such offerings saw their share price rise by over 50 per cent on the day of listing. There were over 90 IPOs that were oversubscribed by more than 10 times and only two IPOs were undersubscribed, the study said. According to the Sebi study, following the RBI guidelines on IPO financing by NBFCs, over-subscription in the NII category declined from 38 times to 17 times. Following SEBI’s policy intervention in the NII share allotment process, the average applications from the non-institutional investor (NII) category seeking more than Rs 1 crore in an IPO declined from around 626 per IPO to around 20 per IPO.