Retail Investor’s Investment Decision Criterion to Invest in IPOs - A Study

Abstract

Initial Public Offering is a kind of public offering by the companies to generate the funds from primary market for the first time. Individual investors are becoming rational to investment in Initial Public Offerings (IPOs) to gain from the listing and hold for short or long term profits. They use different strategies to gain from the IPOs. The present study examines the retail investor’s criterion to invest in IPOs. For this purpose, a questionnaire was developed and administered to 724 sample respondents in Hyderabad and Secunderabad city. The responses are processed in SPSS - 26 version and applied few statistical tools i.e., descriptive statistics, ANOVA and Factor Analysis for interpretation of the results. The present study reveals that retail investor’s investment decision is based on the quota of equity shares available to retail investors in IPO, Equity Participation by Financial Institutions & Foreign Institutional Investors and followed by Price band. Further, the researcher founds that there is a significant variation in means among retail investors on Industry and Sector that Company Issues the IPO and Terms of Issue related to IPOs. The study concludes that, most of the investor’s investment decisions are based on market attractiveness and corporate image. Further the study may be useful to conduct the research in the following directions, to measure the investor’s perception and behavior towards in participation of IPOs, Factors affecting investment decision of retail investors in different geographical areas in India.