Indian investors tend to exhibit the “disposition effect” i.e., they demonstrate greater propensity to exit from Initial Public Offerings (IPOs) that showcase positive listing gains than those that exhibit loss on listing, a Securities and Exchange Board of India (SEBI) study has found. In fact, individual investors sell 50.2% shares allotted to them within the first week of listing, it stated. The SEBI study was undertaken to carry out a behavioural analysis of IPO allottees in main board IPOs during the period between FY22 and FY24. 

Of the 144 IPOs listed during the period under study (April 2021-December 2023), 75% IPOs (108) delivered positive returns. A good 26 IPOs delivered greater than 50% listing day returns. At the same time, as many as 92 IPOs were oversubscribed by more than 10 times while only 2 IPOs were undersubscribed. The study found that it was not just individuals but investors across various categories (Retail, QIB, NII) who exited sooner in case of higher listing gains/good performance within the first week of listing.

The Indian stock market has grown from strength to strength, espically in the last decade, to join the ranks of the top five stock markets in the world in terms of market capitalization. Therefore, it is only natural that more and more investors, seasoned and novice, would want to benefit from the intense activity in the market.

Interestingly, it was observed that almost 50% of the total allotted demat accounts for IPOs during the period of study were opened in the post-COVID period. Further, 85% of the total allotted demat accounts (for the IPOs under study) were opened in the last eight years. This indicates that apart from a lot of new investors entering the stock markets, IPOs are increasingly becoming a popular investment avenue.

If you are looking to make the most of the India growth story and would like to take the first step towards it, start with a Demat account with South Indian Bank.