IPO Listings: A Risky Game for Small Investors in 2026
2026 could be another massive year for initial public offerings in India. More than 100 companies have already received approval to raise about ₹1.4 trillion, according to Prime Database. Millions of retail investors typically rush to IPOs hoping for quick profits by flipping shares after listing. However, seasoned investors and financial advisers urge caution.
Learning from Hard Experiences
Gopal Sharma, a 50-year-old tourist guide from Delhi, has been investing in IPOs since 2008. He offers blunt advice based on his experience. "In my experience, one should not invest in seven out of 10 IPOs," said Sharma. He believes many recent IPOs are priced too high to provide exits for angel and venture capital investors. This leaves little room for individual investors to make money.
Sharma learned this lesson painfully in 2021. He received an allotment in the IPO of One97 Communications, which operates Paytm. At that time, it was India's largest IPO ever. The digital payments leader seemed like a sure winner to many investors. The IPO was oversubscribed by retail investors 1.66 times, issued at ₹2,150 per share.
Sharma got six shares. However, the stock fell 27% on listing day and continued dropping in subsequent months. "Still in Paytm shares, I am at a loss," Sharma admitted. He continues holding them, hoping for recovery.
The Paytm Cautionary Tale
The Paytm experience serves as a warning that even large company IPOs can lose value. This echoes the 2008 Reliance Power IPO shock for an earlier generation of investors. That IPO was oversubscribed 70 times overall, with the retail portion oversubscribed 13.6 times. Yet shares fell 17% on listing day.
Given this unpredictable nature, financial advisers consistently recommend that individual investors hold stocks through mutual funds or the secondary market for long-term gains. Those considering the IPO listing game should understand specific risks thoroughly.
Declining Returns on IPO Listings
Average returns from all IPO listings in 2025 fell by 68% compared to the previous year, Prime Database reports. If an investor bought one lot in every mainboard IPO issued in 2025 and sold all at closing prices on listing day, their average gain would have been 9.55%. Meanwhile, the Nifty 50 index gained 10.5% in 2025.
Sekar Maruda Gounder, a 44-year-old data architect from Chennai, has invested in IPOs for ten years. He largely avoided them in 2025. "Nowadays profit is low, that's the reason why I'm not doing it," Gounder explained. Instead, he focuses on established listed companies whose share prices have dropped or that announce stock splits or bonuses.
"IPO is not the only option to make money in the stock market," Gounder emphasized. "If anyone wants to invest in the stock market, it's better they buy some good stocks from Nifty 50 when the share value is low."
Lower Chances, Smaller Allotments
As more people apply in the retail category, getting an allotment becomes increasingly difficult. This is why Sharma didn't apply for any IPOs in 2025. "What you want, you don't get," he said simply. He also disliked having his money blocked for days during the IPO process. "I've taken a break," Sharma stated.
When an IPO is oversubscribed in the retail category, rules require a lottery system. The maximum number of retail investors receive only one lot of shares. If that lot costs ₹15,000, even if the stock doubles, the gain would be ₹15,000. "It's not really going to rock your world," noted Pranav Haldea, managing director of Prime Database.
The Risk of Not Booking Losses Quickly
Beyond the risk of an IPO falling on listing day, a bigger danger is continued decline afterward. Studies show investors hate taking losses. They often hold losing stocks hoping for recovery, which can worsen losses.
A Securities and Exchange Board of India study examined investor behavior in 144 IPOs between 2021 and 2023. Sebi found only 23% of shares by value were sold when returns were negative. Investors held their losing bets.
Deepak Kumar, an assistant finance manager from Muzaffarpur, experienced this with Paytm. The stock closed 27% down on listing day at ₹1,564 per share. "If at that time, I had sold, then I would not have lost as much as today," Kumar reflected. Paytm was his first IPO, and he expected prices to reach ₹3,000-₹4,000.
Instead, within four months, Paytm shares fell nearly 75%. By February 2024, when shares dropped to around ₹340, Kumar's manager advised buying more to lower his average purchase price. Had he followed that advice, he would have profited as shares later rose to around ₹1,330. But knowing what to do is easier in hindsight than when facing huge losses. Kumar didn't buy more because he feared things could worsen. "What if the company goes bust?" he wondered.
The Risk of Not Booking Gains Quickly
Even successful IPOs on listing day have caused investor heartache. Consider LG Electronics India, which went public in October at ₹1,140 per share. On listing day, shares gained value, closing at ₹1,682.80.
Sai Ram, a 31-year-old IT professional from Hyderabad, received one lot in the LG IPO. He held the shares expecting further gains. However, within days, shares started falling, recently closing around ₹1,371. "For LG, we got all fundamentals right, everything right, but for some reason it's correcting every day," Ram said.
He now uses this experience to revise his IPO strategy. Ram places sell orders before shares open for listing, hoping to secure profits. For long-term savings, he invests regularly in mutual funds through systematic investment plans.
Fear of Missing Out
Earlier this week, Bharat Coking Coal became 2026's first IPO, listing at a nearly 96% premium. Although it gave up some listing gains, social media chat boards buzzed with people wondering whether to buy shares now.
"Don't have FOMO," advised Krishna Rath, a Sebi-registered investment adviser from Bhubaneshwar. He suggests investors exercise extra caution this year. Rath believes the bull run in Indian and global stocks has passed, with valuations currently very high.
"Maybe 20% of the IPOs will make money this year," Rath estimated. He recommends individual investors avoid the listing-day game altogether. Those determined to invest in IPOs should research companies carefully and be highly selective about which stocks they buy. "If you really want to make a 5x, 10x return, hold it for a long period," Rath concluded.
