A new study by the market regulator Securities and Exchange Board of India (SEBI) revealed that more than half of the investors in IPOs between April 2021 and December 2023 sold their shares within a week of listing. The study also found that within a year of listing, this figure increased to 70 per cent in value.
“Individual investors sold 50 percent of the shares allocated to them by value within a week of their listing, and 70 percent of the shares by value within a year,” the study said.
Sebi Investors observed a clear pattern in their behavior: selling assets that have appreciated in value and holding those that have depreciated in value. Their study, which analyzed investors’ actions in 144 Main Board public issues, revealed that the practice of “position-shifting” was widespread among individual investors.
The market regulator has found that investor behaviour is strongly influenced by yields. When IPO yields exceed 20%, investors sell 67.6% of shares by value in a week. In contrast, when yields are negative, only 23.3% of shares by value are sold.
“The study found a strong disposition effect, with investors showing a higher propensity to sell IPO stocks that posted positive trading gains, compared to those that traded at a loss,” he added.
Increase in the number of demat accounts
The surge in interest in public issues is also due to a rise in demat accounts created post the COVID-19 pandemic. About half of the demat accounts that applied for IPOs between April 2021 and December 2023 were opened during the post-COVID-19 era.
Following the RBI guidelines on IPO financing by NBFCs, Sebi The oversubscription rate in the NII category was observed to have decreased from 38 times to 17 times.
Following Sebi’s policy changes in the NII share allotment process, the average number of applications from non-institutional investors (NIIs) seeking more than ₹1 crore in IPOs decreased from about 626 per IPO to about 20 per IPO.
“The average number of applications from NII investors applying for more than ₹“1 crore IPOs fell from about 626 per IPO in the pre-policy period (April 2021 – March 2022) to about 20 per IPO in the post-policy period (April 2022 – December 2023),” the study notes.
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.