Investors sell 54% of IPO shares within a week, finds Sebi study

Based on data from 144 mainboard IPOs listed between April 2021 and December 2023, the study found that about 54% of IPO shares (in value terms) allotted to investors (excluding anchor investors) were sold within a week from listing.

While non-institutional Investors (NIIs) sold 63.3% shares by value, retail investors sold 42.7% shares by value.

Investors, in general, show disposition effect, implying greater propensity to exit from the IPOs that exhibit positive listing gain than those that exhibit loss on listing. Individual investors sold 67.6% shares by value allotted to them within a week, when returns were more than 20% and sold 23.3% shares by value, when returns were negative, it said.

“Mutual funds tend to invest for longer period in IPO shares, whereas banks tend to sell swiftly. Mutual funds sold about 3.3% of allotted value within a week, as compared to 79.8% for banks,” Sebi said.With regard to geographical spread of investors in IPOs, it was observed that about 70 per cent of the IPO investors were from the top four states viz. Gujarat, Maharashtra, Rajasthan and Uttar Pradesh. The retail investors from Gujarat received 39.3 per cent of the allotment in the Retail category, followed by Maharashtra (13.5%), Rajasthan (10.5%).With regards to the accounts opened, it was observed that almost half of the total allotted demat accounts for IPOs during April 21- Dec 23, were opened in the post-COVID period (i.e. during CY2021-CY2023).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, oversubscription under NII category halved from 38 times to 17 times.

The average number of applications from NII investors applying for more than Rs 1 crore in IPOs dropped from approximately 626 per IPO to around 20 per IPO, the report said.