Most IPO shares sold in 7 days, 70% within a year; top investors from Gujarat

Sebi study revealed most investors sell IPO shares within a week. The study highlighted that 70% of IPO applicants are from 4 states.

A majority of investors who receive an allotment of shares in an initial public offering (IPO) sell their shares within a week, a study conducted by the Securities and Exchange Board of India (Sebi) on 144 IPOs listed between April 2021 and December 2023 showed. Of these, 70 per cent sell within a year as most individuals applying for IPOs aim for quick gains, it added.

A Sebi study on 144 IPOs from April 2021 to December 2023 found most investors sell shares within a week, with 70% selling within a year for quick gains.

Sebi said, “The 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. The greater the post-listing gains, the higher the number of investors looking to sell."

The markets regulator added, “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.”

Moreover, the study revealed a drop in oversubscription levels in the high networth individual (HNI) category following the ₹1 crore cap on IPO financing by non-banking financial companies. The average number of HNI applications for more than ₹1 crore in IPOs decreased from roughly 626 per IPO in the pre-policy period (April 2021-March 2022) to around 20 per IPO in the post-policy period (April 2022-December 2023), the study showed.

The study also revealed the geographical distribution of IPO investors as about 70 per cent of IPO applicants come from just four states: Gujarat, Maharashtra, Rajasthan and Uttar Pradesh.

“Retail investors from Gujarat received 39.3 per cent of the allotment in the retail category, followed by Maharashtra (13.5 per cent) and Rajasthan (10.5 per cent). In the HNI category, the allotment for Gujarat-based investors was even higher at 42.3 per cent, followed by Maharashtra (20.4 per cent) and Rajasthan (15.5 per cent),” it showed.

The study also revealed that nearly 48 per cent of dematerialised accounts receiving allotments for the 144 IPOs were opened between 2021 and 2023.