Tempted by the IPO boom? Sebi and these experts would like a word.

livemint.com:

Mint. With the IPO market booming again this year, there is a need for merchant bankers and investment managers to act more responsibly, but also for individual investors to be more informed about what they invest in, they said.

On 2 September the Securities and Exchange Board of India (Sebi) released a study that revealed most retail investors use IPOs for short-term bets rather than long-term investments based on fundamentals. It found that about 54% of IPO shares by value, excluding those allotted to anchor investors, were sold within a week of listing.

Anand K Rathi, co-founder of wealth management company MIRA Money said, “Instead of investing for the long term, many retail investors are looking for short-term gains before moving on to the next IPO." Pritha Jha, partner at Pioneer Legal, said stocks sometimes surge upon listing, but naturally course-correct once the rush of trading post-listing stops. “What this unfortunately means is that even long-term investors put money in IPOs without knowing why, and whether they will benefit in the long term," the lawyer said.

Also read: Here’s why the shares of small businesses sell at inflated prices Also read: Startup IPOs have made a scorching comeback. Beware the optical illusion Before releasing the study, Sebi had issued an advisory that raised concerns about dubious practices in the small and medium enterprise (SME) market, where promoters paint an unrealistic picture of their business, announce bonus shares and stock splits to boost sentiment, and sell their stakes at inflated prices.

Since its inception in 2012, the SME platform on stock exchanges has seen significant growth, raising over ₹14,000 crore in the last decade. Tejas Khoday, founder of the web trading