2 out of 3 stocks listed in last 4 years trade below IPO price. Are investors becoming less forgiving? – News Air Insight

The Indian primary market, which witnessed a resurgence in equity issuances in 2025 after a bumper 2024, is showing signs of fatigue as more investors adopt a wait-and-watch stance. According to the latest Kotak Institutional Equities strategy report, a sharp rise in initial public offering (IPO) activity this calendar year has been accompanied by subdued stock returns and greater selectivity both among institutional and retail investors. The numbers tell a story of accelerating IPO fundraising but shrinking post-listing returns, prompting a rotation in investor behaviour and expectations.

A close look at stock performance reveals a sobering trend: only 15% of 2025 IPOs delivered returns above 25% on listing, down from 41% in 2024. Nearly 27% of listings since 2021 have opened below their issue price, a figure that currently stands at a staggering 38% of all IPOs still trading below water.

Many hit their all-time highs on listing day but could not hold on to the gains, as the initial euphoria has given way to valuation and fundamentals-driven investing. Even among highly oversubscribed or marquee IPOs, only a minority have delivered meaningful post-listing returns.

So far in 2025, 80 companies have come to the market, mobilising $14 billion through IPOs compared to $19 billion raised by 91 companies in 2024. Most issuances have continued to rely on offer-for-sale transactions.

Another interesting trend that the report highlights is that the key objectives of IPO fundraising in 2021 to 2025 are largely for retirement of debt, working capital, and expansions.

The report highlights that institutional money is now stricter—preferring companies with robust fundamentals and reasonable valuation. Retail appetite is also cooling, owing to tepid listing-day gains and subsequent price corrections. Analysts observe that large and mid-cap issues have fared better than small-sized IPOs, with the latter bearing the brunt of poor post-listing performance. “We note that large- and mid-sized IPOs have fared better than small-sized IPOs; the broader trend suggests that investor enthusiasm is becoming more selective and valuation-sensitive,” the Kotak report dated October 13 stated.The IPO pipeline remains strong, with over 200 companies expected to raise around US$35 billion. Most of these offerings are relatively small: issuances below Rs 1,000 crore account for 67% of total IPOs but only 38% of the total issue value; those between Rs 1,000–2,500 crore represent 18% of both the IPO count and the issue value; while larger issuances above Rs 5,000 crore make up just 4.3% of IPOs but contribute 24% of the total issue value.Looking ahead, Kotak’s base case forecasts Nifty earnings growth of 9.8%, 17.2% and 14% for 2026, 2027 and 2028, respectively, with Nifty EPS expected to rise from Rs 1,087 in 2026 to Rs 1,468 by 2028. India’s real GDP growth is pegged at 6.5% per year, while CPI inflation is set to average 4%.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)