By ipomarket.in Editorial Team · Last reviewed: 2026-09-20
Disclaimer: This article is for informational purposes only and does not constitute investment advice. IPO investments are subject to market risks. Please read the offer document carefully and consult a SEBI-registered investment advisor before investing.
"Should I put money into the next big IPO, or just buy shares of a company that is already listed?" It is one of the most common questions retail investors ask, and the honest answer is that neither is automatically better. The two routes carry different risks, offer different advantages, and suit different temperaments. This piece lays out the trade-off using recent market data so you can think about it clearly rather than chase headlines.
The myth worth dropping first
The biggest misconception is that an IPO is a shortcut to guaranteed gains. It is not. An Initial Public Offering (the first sale of a company's shares to the public) carries the same real risk that any equity does: the price can fall on listing day and keep falling afterwards.
The evidence from the last couple of years is sobering. Several IPOs that listed at strong premiums in 2024 were reportedly trading 20% to 40% below their listing price by early 2026. A few 2025 listings, including some well-known names, disappointed on debut or slid sharply after it. So the starting point is simple: an IPO is a stock like any other, minus the trading history.
The structural trade-off
The cleanest way to compare the two is to look at what each gives you and takes away.
| Feature | IPOs | Established (listed) stocks |
|---|---|---|
| Track record | None or very limited | Years of price and financial data |
| Valuation | Set by the issuer, often near peak | Set by the market, moves daily |
| Entry timing | Fixed window, one price band | Buy whenever you choose |
| Information | Rely on the DRHP/RHP | DRHP plus quarterly results, price history, analyst coverage |
| Allotment | Not guaranteed if oversubscribed | Buy exactly what you want |
Two points deserve emphasis.
Valuation timing works against the IPO buyer. Companies list when their valuations are richest, because that is rational for the seller. That is a structural disadvantage for the buyer. With an established stock, corrections and sector selloffs can hand you an entry point that simply does not exist in the primary market.
You control timing with listed stocks. A widely cited example: a large food-delivery company listed in 2021 near ₹116, fell to roughly ₹50-60 after the post-IPO correction in early 2023, and later recovered. Both an IPO-day buyer and a correction-day buyer eventually saw profit, but the entry price shaped the actual return enormously. If you want to understand how issuers arrive at that band in the first place, our explainer on IPO price band meaning is a useful primer.
What retail investors are actually doing in 2026
Behaviour has shifted, and the numbers are telling. According to NSE data reported in September 2026, retail investors made net purchases of ₹39,053 crore in the secondary market so far in FY27, against net sales of ₹5,803 crore in FY26. Over the same FY27 period, retail investors put roughly ₹7,134 crore into IPOs.
Read that carefully: far more retail money is flowing into buying already-listed shares than into fresh IPOs. The reported interpretation is that investors are favouring established records, visible earnings and reasonable valuations over speculative IPO bets.
Participation data points the same way. Across 28 mainboard issues tracked in mid-2026, retail subscription reportedly averaged 12.8 times, well below the 63.1 times seen in the HNI category. In other words, institutions and high-net-worth investors are driving IPO demand while retail stays selective.
The long-term reality of IPO returns
Listing-day pops grab attention, but they are not the whole story. Grant Thornton Bharat data cited in the press showed average oversubscription falling to 39 times in FY26 from 71 times in FY25, average listing-day gains moderating to 7% from 29%, and the average annual performance of listed IPOs at a negative 17%.
Academic work paints a mixed, cohort-dependent picture. A peer-reviewed study of 197 Indian mainboard IPOs listed between 2016 and 2022 found a mean abnormal return of about 26.39% at 780 days, but a median of about −31.24% over the same window, with only 41.1% of IPOs beating the market. The gap between the mean and the median tells you a few big winners lift the average while most listings lag. A separate study of 377 IPOs reported that roughly 10% beat the benchmark over three years.
These studies use different samples, time periods and methods, so treat the exact figures as directional rather than definitive. The consistent message across all of them: over multi-year horizons, most IPOs do not beat the market, and picking the exceptions is hard. If you want a structured way to think past the listing pop, see our framework for evaluating an IPO for a 3-5 year hold.
When an IPO can still make sense
None of this means avoiding IPOs entirely. It means being disciplined about them.
Wealth managers quoted in early 2026 suggested a common rule of thumb: keep IPO exposure to around 5-10% of an equity portfolio, insist on valuation discipline, and prioritise companies with a clear use of proceeds and visible promoter alignment. This is professional opinion, not a regulatory mandate, but it reflects a broad consensus among advisors after a bruising stretch of post-listing losses.
An IPO may be worth serious study when the business has genuine earnings visibility, the price band is not stretched against listed peers, and you would be comfortable holding the stock for years even if the listing pop never arrives. The grey market premium you see quoted is a sentiment gauge, not a valuation tool; our guide on what IPO GMP is and how it works explains why it should not drive the decision.
SEBI's protective role
The regulator has tightened the framework in ways that reduce, though never eliminate, the risk of overpaying. Companies must file a Draft Red Herring Prospectus (DRHP) detailing financials, risk factors and use of proceeds. Newer price-discovery guidelines push issuers to justify their valuation metrics more clearly, making blatant overpricing harder. Disclosure requirements around business operations, risk factors and management structure have also been strengthened.
These safeguards improve the information available to you, but they cannot make a market price rise. Reading the disclosures still matters; our guide on what a DRHP is and how to read it walks through the sections that reveal the most.
A practical way to decide
Rather than asking which route is "better", ask which fits your situation:
- Do you need proven data before committing? Established stocks give you years of results to study.
- Are you comfortable with a fixed entry price and no track record? Then a carefully chosen IPO can have a place, kept to a modest slice of the portfolio.
- Are you tempted by listing-day gains alone? That is the weakest reason to apply, given the moderating pops and negative average annual returns.
Both routes are equity investing. Both carry market risk. The difference is mostly about information and timing, and in 2026 the data shows retail investors leaning towards the certainty that established stocks offer.
FAQ
Are IPOs safer than buying regular listed stocks?
No. An IPO is not inherently safer. It carries the same market risk as any equity, plus the added uncertainty of a limited or absent trading history and a valuation set by the issuer. Established stocks let you study years of data and choose your entry point.
How much of my portfolio should go into IPOs?
There is no official rule. Wealth managers quoted in early 2026 commonly suggested capping IPO exposure at around 5-10% of an equity portfolio and staying disciplined on valuation. This is professional opinion, so weigh it against your own risk tolerance and, ideally, a SEBI-registered advisor's input.
Do most IPOs beat the market over the long run?
Research suggests most do not. One peer-reviewed study of 197 IPOs from 2016-2022 found only about 41% beat the market, and FY26 data showed the average annual performance of listed IPOs at negative 17%. A minority of big winners lifts the averages, but they are hard to identify in advance.
Why are retail investors buying more listed stocks than IPOs in 2026?
NSE data for FY27 showed retail net purchases of about ₹39,053 crore in the secondary market versus roughly ₹7,134 crore into IPOs. The reported reason is a preference for established track records, visible earnings and reasonable valuations after a run of disappointing post-listing performance.
Does SEBI's tighter disclosure mean IPOs cannot be overpriced now?
No. Stronger disclosure and price-discovery rules make overpricing harder to hide and give you more information, but they do not guarantee a fair price or a rising stock. You still have to read the DRHP and judge the valuation yourself.
Last reviewed: 2026-09-20 by the ipomarket.in Editorial Team.