In light of the increasing participation of retail investors and the heightened oversubscription in recent IPOs, SEBI conducted an in-depth study to analyze investor behavior in Main Board IPOs. The study encompasses data from 144 IPOs listed between April 2021 and December 2023.
Key findings of the study include:
- "Flipping" behavior among Individual Investors: Individual investors sold 50% of the shares allotted to them by value within a week of listing, and 70% of shares by value within a year.
- Disposition effect evident among Investors: The study found a strong disposition effect, with investors showing a greater propensity to sell IPO shares that posted positive listing gains, compared to those that listed at a loss.
- Returns influencing the selling behavior: When IPO returns exceeded 20%, individual investors sold 67.6% of the shares by value within a week. In contrast, only 23.3% of shares by value were sold when returns were negative.
- Surge in Demat accounts post-COVID: Nearly half of the demat accounts that applied for IPOs between April 2021 and December 2023 were opened during the post-COVID period (i.e., 2021-2023).
- Following SEBI’s policy interventions regarding Non-Institutional Investor (NII) share allotment process and RBI’s guidelines on IPO financing by NBFCs in April 2022, the following trends were observed:
- Significant reduction in NII category oversubscription: Oversubscription under the NII category halved from 38 times to 17 times.
- Sharp decline in applications from “Big Ticket NII Investors”: The average number of applications from NII investors applying for more than ₹1 crore in IPOs dropped from approximately 626 per IPO in the pre-policy period (April 2021 - March 2022) to around 20 per IPO in the post-policy period (April 2022 - December 2023). Note that the total funds raised during the two periods were comparable.
The study is available on the SEBI website at www.sebi.gov.in
