MUMBAI: 54 per cent of the IPO shares get sold within a week of their listing, the markets regulator SEBI said.
This data is based on the analysis of 144 main board primary share sales which hit the market between April 2021 and December 2023.
In a study released on Monday, the regulator said the findings are based on a recent study by the Department of Economic and Policy Analysis.
The study shed light on investor behaviour in Initial Public Offerings (IPOs), which has found as much as 54 per cent of the IPO shares get sold within a week of listing.
This does not include anchor investors selling, indicating a strong tendency for short-term profit-taking among IPO investors.
Of this, retail investors sold 42.7 per cent of their allotted shares within a week, while non-institutional investors sold 63.3 per cent in the same period, suggesting that individual investors, particularly NIIs, are more likely to engage in short-term trading strategies.
On the behaviour of the institutional investors, the study says qualified institutional buyers showed more varied behaviour with some categories of them holding onto their shares longer, while exclusive QIBs (non-anchor institutional buyers) sold 65.4 per cent within a week.
The study has seen a positive correlation between listing gains and the percentage of shares exited. IPOs with gains exceeding 20 per cent in the first week saw higher exit rates across all investor categories.
The study also found that a higher percentage of exits occurred in issues with smaller issue sizes (below Rs 1,000 crore) but were heavily oversubscribed, particularly among individual investors.
Recent policy changes since April 2022, including a lottery-based allotment for non-institutional investors and restrictions on IPO funding, have had noticeable effects, says the study with the number of high-value applications dropping significantly and so did oversubscription levels which declined from 37.5 times to 17.2 times.
The study further reveals that about 70 per cent of IPO investors were from just four states: Gujarat, Maharashtra, Rajasthan, and UP with Gujarat alone accounting for 39.3 per cent of retail allotments.
Meanwhile, addressing a CII event on Monday, Ashwini Bhatia, SEBI whole-time member said that over Rs 14,000 crore have been raised through SME listings and it's time for some caution as there is no check and balance in such listings.
He added that the market ecosystem must say no when required to say no because there are no checks and balances in SME listing. Nobody is saying no to SME clients, he said and advised them to tap alternative sources of funding, such as crowdfunding and venture capitalists and that Rs 1169 crore of alternative investment fund commitments for SMEs of March 2024.
