Majority of investors exit a stock within 1 week of listing, reveals Sebi study; here is a summary of key findings

Money managers often emphasize the importance of being patient with equity investments. Did you know that a majority of investors don't even stay invested in a newly listed stock for one week? Yes, that's what a SEBI study has revealed. About 54 percent of non-anchor investors who receive allotments exit a stock within one week of listing, according to the study by the country's capital market regulator, which cites data from April 2021 to December 2023. 

Sebi conducted the study to analyse the investor behaviour in mainboard IPOs in light of increasing retail participation and heightened oversubscription in the recent IPOs.

The study covered as many as 144 mainboard listings during the 33-month period. 

Here are some key findings of the study: 

• Flipping Behaviour Among Individual Investors: Individual investors 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.
• Disposition Effect Among Investors: Investors displayed a greater propensity to sell IPO shares that delivered listing gains than those that listed at discounts.
• Returns Influencing Selling Behaviour: When IPO returns exceeded 20 per cent, individual investors sold 67.6 per cent of the shares by value within a week. On the other hand, only 23.3 per cent of shares by value were sold when returns were negative.
• Surge in Demat Accounts Post-COVID: Nearly half of the demat accounts where applications were made IPOs between April 2021 and December 2023 were opened during the post-COVID period, from 2021 to 2023. 

Sebi also observed the following trends following its policy interventions in the share allotment process for non-institutional investors (NIIs) and the release of the RBI’s guidelines on IPO financing by NBFCs in  April 2022:

• Significant Reduction in NII Oversubscription: Oversubscription by NIIs halved from 38 times to 17 times during this period. 
• Sharp Decline in Applications From Big Ticket NII Investors: There was a significant drop in the average number of IPO applications of more than Rs 1 crore by NII investors from approximately 626 per IPO in the pre-policy period to around 20 per IPO in the post-policy period.

For the study, Sebi considered the period between April 2021 and March 2022 as the pre-policy period and that between April 2022 and December 2023 as the post-policy period. 

Catch all the latest stock market updates here. For all other news related to business, market, tech and auto, visit Zeebiz.com.                                                              s