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More than half of the investors in initial public offerings (IPOs) between April 2021 and December 2023 sold the shares within a week of listing, a study by the Securities and Exchange Board of India (SEBI) revealed on Monday. 

In light of the increasing participation of retail investors and the heightened oversubscription in recent IPOs, the markets regulator conducted an in-depth study to analyse investor behaviour in Main Board IPOs. 

It found “Flipping" behaviour among individual investors who sold 50 per cent of the shares allotted to them by value within a week of listing, and 70 per cent of shares by value within a year.

The SEBI 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.

“When IPO returns exceeded 20 per cent, individual investors sold 67.6 per cent of the shares by value within a week. In contrast, only 23.3 per cent of shares by value were sold when returns were negative,” the markets regulator observed.

Nearly half of the demat accounts that applied for IPOs between April 2021 and December 2023 were opened during the post-COVID period. 

According to the study, the period between April 2021 and December 2023 saw a total of 144 new companies making their debut on the in the stock market through main board IPOs. 

At least 26 of such offerings saw their stock price surge more than 50 per cent on the day of listing.

There were more than 90 IPOs that saw subscription in excess of 10 times with a mere two IPO remaining undersubscribed, the study noted.

After the RBI guidelines on IPO financing by NBFCs, over-subscription in the NII category halved, from 38 times to 17 times, according to the SEBI study.

The average application from Non-Institutional Investor (NII) category seeking over Rs 1 crore in IPOs fell from approximately 626 per IPO to around 20 per IPO, after SEBI’s policy interventions in the NII share allotment process.