54% Of IPO Investors Sell Shares Within A Week: SEBI Study

SEBI has shed light on the prevalent flipping behaviour among investors in the initial public offering market, revealing significant trends in how different investor categories handle their allotted shares.

A study by the market regulator, titled 'Analysis of Investor Behaviour in Initial Public Offerings,' which was undertaken by the Department of Economic and Policy Analysis, indicates that approximately 54% of IPO shares, in terms of value, were sold within a week of listing, with individual investors showing a pronounced tendency to exit quickly.

Individual investors sold 50.2% of their allotted shares within the first week after listing. Of these, non-institutional investors sold 63.3% of their shares by value, while retail investors sold 42.7% of their shares within the same timeframe.

The market regulator also identified a behavioural pattern it termed 'disposition effect' among investors. This means that investors have a greater inclination to exit IPOs that exhibit positive listing gains, as opposed to those showing a loss on listing.

Individual investors sold 67.6% of their shares by value within a week when returns exceeded 20%, compared to only 23.3% when returns were negative, the study revealed.

In contrast, mutual funds invest in IPO shares for a longer duration, selling only about 3.3% of the allotted value within a week. Banks, on the other hand, displayed a much shorter holding period, selling approximately 79.8% of their allotted shares within the same period.

Geographically, the study highlights that 39.3% of retail investors were from Gujarat, followed by Maharashtra with 13.5% and Rajasthan with 10.5%.

Additionally, the data reveals a surge in demat accounts opened during the post-Covid period, with almost half of the total allotted accounts for IPO applications being opened during the period.