The Securities and Exchange Board of India (SEBI) recently conducted a study analyzing the trading patterns of investors post initial public offerings (IPO). Some interesting findings were revealed about the short-term “flipping” behavior adopted by various categories of investors.
As per the report, around 54% of the IPO shares allocated to non-anchor investors were sold within one week of listing on the stock exchanges. Individual investors led the selling, offloading 50.2% of their total allocation. Non-institutional investors (NIIs) and retail shareholders disposed off 63.3% and 42.7% of shares respectively in value terms.
Mutual funds tended to hold onto shares for longer durations. They sold only around 3.3% of allocated shares within the first week, compared to 79.8% for banks. Investors also exhibited greater propensity to sell holdings delivering positive listing gains rather than those witnessing losses.
The study examined 144 companies that got listed between April 2021 and December 2023. 75% of these IPOs rewarded investors with positive returns on the listing date itself. Strong oversubscription from retail participants, supported by positive market sentiment, ensured good subscription levels for most offerings.
With newer retail investors flocking to the market post-COVID, oversight of listing day behavior can offer meaningful insights to regulators. The findings indicate the need for awareness among first-time investors about post-listing price movements and volatility.
