HOW IPO REFORMS CREATED A NEW KIND OF INVESTOR EUPHORIA AROUND LISTINGS

The Indian initial public offering (IPO) market has undergone multiple path-breaking reforms over the last five years—deepening participation, expanding the investor base, and drastically shortening IPO cycles.

- SHYAM SEKHAR

The current IPO boom is a direct outcome of these reforms. By tightening timelines and ensuring that only the amount required for allotted shares leaves an investor's account, Sebi transformed the IPO experience. The old pain of waiting for refunds, tracking missing funds, or chasing registrars is now gone. Under the applications supported by blocked amount (ASBA) mechanism, investors’ money stays in their bank accounts even as they bid for IPO allotments.

These reforms permanently changed the Indian IPO market. But they also brought a new behavioural challenge.

Investors began to see IPOs as a short-term “lottery” for idle funds—money that could sit risk-free in their account for eight days while chasing a listing gain. The equity risk inherent in IPO investing was increasingly overlooked for the convenience of a quick punt. Meanwhile, the large reservation of shares for institutional investors shifted a chunk of the risk from retail buyers to mutual funds. When institutions showed strong buy-in, IPOs seemed almost guaranteed to succeed.