The Indian stock market is going through a rough patch, making it more important than ever for companies launching their IPOs to focus on ensuring listing gains. The NSE Smallcap Index has taken a hit, dropping around 20% this year, while NSE Midcap Indexes have fallen by 13%. By contrast, the Nifty 50 Index and BSE Sensex have experienced a relatively modest decline of around 3%.
Meanwhile, global markets seem to be doing much better—the MSCI China Index is up 15%, European markets have gained 10%, and the S&P 500 Index has inched up by 4%. This stark contrast highlights the challenges Indian stocks are facing, especially with Foreign Institutional Investors (FIIs) pulling out ₹11.6 billion worth of investments.
The IPO scene in India
Even with market volatility, companies are still lining up for IPOs. At the moment, 70 firms have filed Draft Red Herring Prospectuses (DRHPs) with SEBI, and 36 have already received the green light to raise over ₹1 lakh crores. Since mid-2020, about 273 companies have gone public on Indian stock exchanges.
However, the market swings have left their mark—31% of these stocks are trading below their issue price. On the bright side, 44% have delivered impressive returns of over 25% above their listing price, proving that well-priced IPOs can still attract strong investor interest.
The Indian market has shown resilience in handling large issuances. Take a recent tech IPO worth ₹8,750 crores—it was entirely an offer for sale but still managed to close its first day 6.77% higher than the issue price despite tough market conditions. This goes to show that quality companies with fair pricing continue to generate demand.
Why listing gains matter
Investors are getting pickier about IPOs, favouring companies with strong fundamentals and reasonable pricing. For companies planning to go public, ensuring listing gains is not just about day-one performance—it helps build long-term trust and keeps investors engaged. Overpricing an IPO might bring in more money initially, but if the stock struggles post-listing, it could put off future investors.
Companies have two choices: lower their pricing (and possibly reduce the issue size) or postpone their IPOs. A smarter approach would be to build a solid anchor book and ensure strong participation from High Net-worth Individuals (HNIs) and retail investors rather than just aiming for the highest possible issue price. Those looking to invest in stocks should focus on well-valued IPOs, as listing gains help create positive momentum, setting the stage for long-term success in the stock market.
Investment opportunities amid market fluctuations
For those looking to invest in stocks, the current market scenario presents both risks and opportunities. While prolonged downturns might make retail investors hesitant, having the flexibility to invest in both private and public markets allows for better entry points. More companies are now open to pre-IPO funding, giving them access to capital while they wait for better market conditions. A stronger shift in market sentiment will be necessary to absorb the high number of IPOs lined up.
With global markets outperforming Indian equities and FIIs selling large amounts, companies need to prioritise listing gains to ensure successful IPOs. For those keen to invest in stocks, focusing on well-valued offerings with strong fundamentals remains the best bet in these unpredictable times.
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