Good morning [%first_name |Dear Reader%],

Earlier this week, market regulator Sebi confirmed what many of us already know from intuition and observation. A great many Indians are compulsive flippers—buying and selling in quick time to make a quick buck. That’s nowhere more obvious than in the initial public offering (IPO) bazaar. 

The Indian stock market has been on liquidity-steroids since the pandemic, and all manner of companies have been hitting the public market. IPOs, among the usual hangers-on in any bull run, have now been turbo-charged with the kind of frenzy we see almost everywhere on the bourses. 

I had written about the Indian IPO wave throwing the rulebook out of the window nearly three years ago. Much of it, from loss-making companies pitching for funds to crazy oversubscriptions to investors across the board playing for listing gains, still holds strong.

Investors can’t seem to get enough. Most of these IPOs have been lapped up with massive oversubscriptions—thanks to big listing gains in many of the IPOs that came before them. And many of those who landed IPO shares in the allotment roulette have flipped them big time for big gains. It’s a virtuous cycle… until it lasts. Similar wild parties, even if smaller in scale, have played out in earlier years (in 2007 and 2010 for instance) only to end abruptly. 

But for now, the music is playing and the flippers are dancing away. 

And a fascinating study conducted by Sebi—on 144 main board IPOs between April 2021 and December 2023 that cumulatively raised Rs 2.13 lakh crore (US$25.4 billion)—has come up with some startling findings.

Let me list some of them out: 

i. Overall, more than half—about 54%—of IPO shares (in value terms) allotted to investors were sold within a week of the listing

ii. Individual investors sold 50.2% of shares (in value terms) allotted to them within the week, and of these: 

• Non Institutional Investors (NIIs) sold 63.3% shares by value, and
• Retail investors sold 42.7% shares by value

Now, retail investors are those who apply for less than Rs 2 lakh (US$2,380) worth of shares in an IPO. And non-institutional investors is just a fancy name for high net-worth individual (HNI) investors; those who invest Rs 2 lakh or more.