The 'Short Delivery' Trap: Nithin Kamath Breaks Down The Technical Factors Driving Post-IPO Rallies
The Zerodha CEO cited the example of Meesho's auction and said, "Meesho's auction price was Rs 258, while the market price at the time was around Rs 226.
Zerodha CEO Nitin Kamath noted high gains in IPOs up to a few days after their listing and attributed them to a technical factor known as "a short delivery."
Kamath explained, "many traders attempt to short these stocks intraday, expecting a fall, but if the stock hits the upper circuit, they get trapped with no buyers to sell to. This leads to what’s called a short delivery."
He added that when this happens the to settle the trade, the exchange conducts an auction the next day between 2:30 p.m. and 3:00 p.m. Rates at these auctions prices can reach up to significant premiums from the original market prices.
The Zerodha CEO cited the example of Meesho's auction and said, "Meesho's auction price was Rs 258, while the market price at the time was around Rs 226.
Kamath's remarks come amid Meesho's blockbuster performance a week into its listing on the exchanges. The stock price has more than doubled in just seven sessions, increasing by 110%.
The shares reached an all time high on Thursday after rising 17.6% to Rs 254.40 apiece. The stock settled nearly 9% higher at Rs 235.57 apiece.
The Changing Tides Of Indian IPOs
India's startup IPO pipeline is back in full swing, and this time, it looks very different from the exuberant listings of the past cycle. Recent debuts by Groww, Lenskart and Pine Labs underline both the renewed appetite for tech listings and the growing caution among public market investors.
Fintech firm Pine Labs listed on Nov. 14 at Rs 242 per share, a 9.5% premium to its IPO price of Rs 221. However, post-listing momentum has faded. As of Dec. 18, the stock trades around Rs 225 on the NSE and Rs 224.75 on the BSE, down about 7% from its debut price.
In contrast, Groww, operating as Billionbrains Garage Ventures, has delivered a stronger post-listing performance. The online brokerage listed on Nov. 12 at around Rs 112–114 per share, implying a 12–14% premium to its IPO price of Rs 100. The stock surged to Rs 134 on debut before closing near Rs 131.
