By ipomarket.in Editorial Team · Last reviewed: 2026-08-07
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.
A popular assumption among retail investors is that smaller IPOs, being nimbler and less discovered, hand out fatter listing-day gains than big large-cap issues. It sounds intuitive. It is also not clearly supported by the data we could verify. This article walks through what the numbers actually say about IPO performance across company sizes, and where the honest gaps in the evidence lie.
First, what do small, mid and large cap mean?
SEBI standardised these categories through a circular dated 6 October 2017. The classification is ranking-based, not tied to a fixed rupee value:
- Large-cap: the top 100 companies by market capitalisation
- Mid-cap: companies ranked 101 to 250
- Small-cap: companies ranked 251 onwards
This matters because "small-cap" in a listed-market sense is different from an "SME IPO". SME IPOs list on the dedicated NSE Emerge and BSE SME platforms, are usually much smaller in issue size, and follow a separate framework. If you are unclear on the difference, our explainer on mainboard vs SME IPO differences is a useful starting point.
How big was the IPO market in 2024?
2024 was a record year. Indian companies raised around ₹1.6 trillion through IPOs, and India consolidated its position as one of the busiest IPO markets in the world by deal count. The average issue size rose sharply, from roughly ₹867 crore in 2023 to over ₹1,700 crore in 2024, according to Business Standard.
The headline example was Hyundai Motor India, whose IPO raised ₹27,870 crore in 2024, the largest in the country's history to date.
The listing-gains data: a cooling, not a size story
Here is where the intuitive "smaller is better" thesis runs into trouble.
Average first-day listing gains fell sharply. Per CrispIdea data, the average day-one listing gain dropped to 8.4% in 2025, down from 29% in 2024. That is a market-wide cooling rather than a small-versus-large phenomenon.
Many 2024 debuts did not hold up. A study by SAMCO covering 2021-2024 found that 48% of mainboard IPOs eventually traded below their listing price, and 73% failed to outperform the Nifty Smallcap 250 index over the period. In other words, only about one in four IPOs beat that broader small-cap benchmark.
SME IPOs were a mixed bag, not a jackpot. In 2025, 268 SME IPOs were launched, raising roughly ₹12,112 crore collectively. But of 254 SME listings that year, 132 ended in the red on listing day, a listing-loss rate of around 52%. That is a coin-flip outcome, and it directly contradicts the idea that smaller issues reliably deliver bigger gains.
For context on the broader market for 2025, roughly 30% of IPOs delivered negative returns according to Uniqus data. So while mainboard IPOs also carried real risk, the SME listing-loss rate was noticeably higher.
If you want to understand how listing-day pricing and grey-market signals actually work before drawing conclusions, see what is IPO GMP and how does it work.
What about the secondary market? Doesn't small-cap outperform?
This is the part that fuels the myth. In the secondary market, small and mid-cap indices did outshine large caps in 2024:
- Nifty Smallcap 250: 25% return
- Nifty Midcap 150: 23% return
- Nifty 50: 9% return
But two important caveats apply.
First, secondary-market index returns are not the same thing as IPO listing gains. A newly listed company is not automatically riding the index it belongs to.
Second, the trend reversed. During the correction from September 2024 to March 2025, large-caps fell about 17%, mid-caps about 20%, and small-caps about 22%, per SMC data. Smaller stocks fell harder. In 2025 year-to-date, the Sensex gained in the 9-10.5% range while the BSE SmallCap declined around 6.6%.
There is also a distribution problem. Reported data suggests the median small-cap and mid-cap stock significantly underperformed its index, meaning a handful of high-fliers masked weakness across the broader universe. The average return can look healthy while the typical stock does not.
The valuation caution
One widely cited view came from NYU professor Aswath Damodaran, who in 2025 described parts of the Indian market as overvalued, reportedly flagging mid-caps as heavily overextended and small-caps as somewhat overvalued, while suggesting large-caps looked comparatively better priced. This is a credible analyst opinion rather than market consensus or regulatory data, so treat it as a lens, not a verdict.
So is "smaller equals better returns" true?
Based on the verified figures, no clear case supports it. The evidence points the other way, or at best to "it depends":
- 52% of SME IPOs listed below issue price in 2025
- 73% of 2021-2024 mainboard IPOs underperformed the Nifty Smallcap 250
- Average listing gains compressed from 29% to 8.4% as the market matured
- Smaller stocks fell harder in the 2024-25 correction
What the data does support is more nuanced: mainboard IPOs tend to carry greater institutional backing and liquidity, while SME issues are smaller, thinner and more prone to sharp swings in both directions. Size alone is not the driver. Fundamentals, sector, pricing discipline and where you are in the market cycle matter more.
Important honesty note: we did not find a clean, published data set that isolates listing-day gains by issuer market-cap category (large versus mid versus small) from NSE, BSE or SEBI. Much of the size-based commentary online conflates SME versus mainboard, or secondary-market index returns with IPO returns. Be sceptical of confident claims on this that do not cite such a breakdown.
How retail investors can think about this
Rather than chasing a size label, it helps to build a repeatable process. Our 10-step framework to analyse an upcoming IPO covers reading the prospectus, checking financials and assessing valuation. You can also track live grey-market signals on our GMP page and see the current pipeline on upcoming IPOs, but neither is a substitute for reading the offer document.
FAQ
Do SME IPOs give higher listing gains than mainboard IPOs?
Not reliably. In 2025, around 52% of SME IPOs (132 of 254 listings) closed below their issue price on listing day, per CrispIdea data. That is closer to a coin flip than a guaranteed premium, and it was a higher loss rate than mainboard IPOs that year.
How does SEBI classify large, mid and small-cap companies?
By market-cap ranking, standardised in a 2017 circular. The top 100 companies are large-cap, ranks 101-250 are mid-cap, and rank 251 onwards are small-cap. This is separate from the SME IPO platform, which is a different listing framework.
Why did average listing gains fall in 2025?
Average day-one listing gains dropped from 29% in 2024 to 8.4% in 2025 according to CrispIdea. The most cited reasons are market maturation and tighter pricing after a very hot 2024, though the exact drivers are not established in a single source.
Does small-cap outperformance in indices mean small-cap IPOs will do well?
No. Small and mid-cap indices beat large-caps in 2024, but the trend reversed in the September 2024 to March 2025 correction, when small-caps fell hardest. Index returns also differ from individual IPO listing gains, and the median small-cap stock reportedly lagged its index.
Is there reliable data comparing listing gains by IPO size?
We could not locate a published NSE, BSE or SEBI data set that isolates listing-day gains strictly by issuer market-cap category. Claims that make this comparison should cite such a breakdown; many instead mix SME versus mainboard data or secondary-market index returns.
Last reviewed: 2026-08-07. Figures are drawn from cited third-party research and market reports and should be re-verified before publication.