By ipomarket.in Editorial Team · Last reviewed: 2026-10-06
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 loud opening bell and a green listing screen can make an IPO look like a clear win. But the data over the last few years tells a more sober story: a strong debut and a lasting investment are not the same thing. Many Indian IPOs that opened higher than their issue price have drifted below it within months. This article analyses why that happens, using figures from recent market reports, so retail investors can read listing-day excitement with more context.
The gap between listing pops and lasting returns
The shift over the past year or two has been sharp. In FY25, 80 mainboard IPOs raised ₹1.63 lakh crore with an average listing gain of 70%, according to Value Research. By calendar 2025 the picture had changed dramatically, with median IPO listing gains of just 3.8% despite strong subscription, and most issues reportedly trading below their listing price within months.
The momentum weakened further into 2026. According to a report by Whalesbook, average listing gains for Indian IPOs fell to -1.9% in 2026 compared with 10% in 2025, with 13 of 18 newly listed companies trading below their offering price. Fundraising has cooled alongside this: IPO fundraising in India reportedly fell 21% in 2026 versus 2025, with companies cutting issue sizes and accepting lower valuations amid weaker sentiment, as reported by Outlook Business.
The pattern is not confined to small issues. Share India reports that more than half of India's large IPOs of ₹500 crore and above from 2023 to 2025 are now trading below their issue price despite strong listing-day pops. A separate ZeeBiz report notes that seven of 11 large IPOs of ₹9,500 crore or more launched since 2021 are currently trading below issue price; together those 11 raised around ₹1.05 lakh crore.
Why does this keep happening?
Several forces tend to overlap. No single one explains every case, but together they describe how a hot listing can turn into a disappointing holding.
1. Overvaluation at the starting line
Overvaluation at launch is reportedly a primary cause of IPO failures, per analysis from Jagannath University, with stocks falling when they fail to live up to investor expectations after listing. When an issue is priced for perfection, there is little room for error and even a decent quarter can look underwhelming against the price.
Two often-cited examples: Zomato's stock reportedly dropped below its issue price after its 2021 listing, driven by concerns about high valuation and lack of profitability at the time; and the Life Insurance Corporation IPO in 2022 reportedly listed at an 8.5% discount to its IPO price, which the same analysis attributes to unfavourable macroeconomic conditions.
2. Lock-in expiries unlock fresh selling
Shares held by insiders and early backers cannot be sold immediately. SEBI rules set minimum lock-in periods of 18 months for promoters, 6 months for pre-IPO investors, and 30-90 days for anchor investors, as outlined by Choice. When these windows end, supply can rise suddenly. Anchor investors in particular reportedly book profits when their lock-in expires, creating supply pressure that drives prices down, according to Share India. If you want to understand these windows in detail, see our guide to IPO lock-in periods for promoters and anchor investors.
3. Earnings that do not keep pace
A listing is a promise about future performance. Post-IPO, many companies reportedly report slower revenue growth, weaker margins, limited debt reduction, delayed use of IPO funds, and missed milestones that erode investor confidence, according to Share India. When the story on the roadshow does not show up in the quarterly numbers, the price often corrects.
4. Grey market noise versus real demand
The grey market premium, or GMP, is an unofficial, unregulated figure that is widely watched before listing. Share India notes that GMPs often reflect speculative trading rather than genuine demand, which can leave a stock overpriced before listing with little room for upside after debut. If you are new to the concept, our explainer on what IPO GMP is and how it works covers the basics and the limits of the signal.
Subscription numbers are not a scoreboard
A heavily oversubscribed IPO feels like a sure thing, but the evidence pushes back on that instinct. In 2025, of the 20 largest IPOs, only five of those with double-digit subscription delivered first-day gains, according to ZeeBiz, suggesting subscription figures offer little certainty about listing performance. High demand reflects how many people applied, not whether the price was reasonable or the business durable.
For context on how these demand figures are built across investor groups, see our breakdown of IPO subscription status across QIB, NII and retail.
The timing of returns
There is also a window effect. The strongest IPO returns are typically realised within the first three to six months after listing, after which returns reportedly depend increasingly on fundamentals rather than sentiment, according to Market Insiders. In other words, the early pop is often sentiment-driven; what comes next is a referendum on the actual business.
This helps explain the recurring split in the data: strong listing-day gains followed by a slide once lock-ins expire, early momentum fades, and the market starts pricing results instead of hype.
What this means for how you read an IPO
The takeaway is not that IPOs are bad. It is that a green listing screen is a weak signal on its own. The 2025-26 data, as reported above, shows that the same issues can look like winners on day one and losers a few months later.
Investors appear to be adjusting. Multiple reports describe buyers becoming more selective amid weaker risk appetite, heightened secondary-market volatility, and mixed post-listing performance of recent IPOs. That selectivity is arguably the rational response to this cycle: weigh valuation, the realism of growth and margin targets, the use of proceeds, and the calendar of lock-in expiries before anchoring to a listing-day price.
FAQ
Do strong subscription numbers mean an IPO will list well?
Not reliably. In 2025, of the 20 largest IPOs, only five of those with double-digit subscription reportedly delivered first-day gains, according to ZeeBiz. Subscription shows how many applied, not whether the price is reasonable.
How bad have recent listing gains been?
Average listing gains for Indian IPOs reportedly fell to -1.9% in 2026 from 10% in 2025, with 13 of 18 newly listed companies trading below offering price, per a Whalesbook report. In calendar 2025, median listing gains were 3.8%, down from an average 70% in FY25 per Value Research.
Why do IPOs fall after lock-in periods end?
Lock-in rules set minimum holding periods of 18 months for promoters, 6 months for pre-IPO investors, and 30-90 days for anchor investors. When these expire, insiders and early backers can sell, adding supply. Anchor investors reportedly book profits at expiry, which can push prices down.
Is the grey market premium a good guide to post-listing returns?
It has clear limits. The GMP is unofficial and unregulated, and reportedly often reflects speculative trading rather than genuine demand, which can leave a stock overpriced with little room for upside after listing.
When do IPO returns start depending on fundamentals?
The strongest returns are typically seen within three to six months of listing, after which returns reportedly depend more on fundamentals than sentiment, according to Market Insiders.
Last reviewed: 2026-10-06 by the ipomarket.in Editorial Team.