This year, India has lagged in terms of stock market returns, compared to emerging markets and several developed nations. Yet, the country’s IPO (Initial Public Offering) segment is on a roll. Backed by three major IPOs in the past few days, which included Tata Capital, LG Electronics, and WeWork India, the Indian market raised more than $14 billion between January 1, 2025, and October 8, 2025. Almost 80 companies, including the three recent ones, have mopped up money from the primary markets. The trend seems to be a continuation of last year, when more than 90 firms raised a dazzling `1,60,000 crore. Experts are waiting to see if this year’s figure is likely to cross the record set last year. The record prior to this was in 2021, when more than 60 IPOs raised `1,19,000 crore. But the last was during the post-pandemic peak. These are some of the trends in a recent report by a global research firm.

There are three distinct sub-trends that may be discerned from the IPO data over the past 20+ months. The first is that the investors have understood the distinction between primary and secondary markets. For example, India’s indices’ returns this year were negative, and the year-to-date ones are almost zero. Other markets, including the Asian ones like South Korea, Taiwan, and China have boomed. Analysis shows that India’s importance among the emerging markets has plunged, with more money being invested elsewhere. Yet, most of the IPOs received enthusiastic responses, and were oversubscribed. Clearly, the investors have shied away from the already-listed shares, and placed their bets on the newly-floated ones. Despite the aggressive IPO pricing in some cases, there is a belief that they may offer better returns, either on listing, or within a year or two. There is the FOMO factor. Since many investors missed the chances in past IPOs, whose prices boomed, they do not wish to miss others.

Second, there are investing differences that have emerged between the foreign and local investors, as well as institutional and retail ones. Since January this year, the foreign institutional investors have whisked away $18 billion from the secondary market, and pushed them into other markets. Local investors supported the secondary market, as mutual funds garnered record amounts, as well as the primary markets (IPOs). Among the institutions too, Indian ones like Life Insurance, which is flush with money, went all hog to buy Indian equities, even as the foreigners sold them. It was one of the key participants in several IPOs too. So were the retail investors, although the recent Tata Capital got a tepid response from them. To add an interesting twist, according to a recent analysis, foreign institutions invested $5 billion in IPOs in 2025, despite being net sellers in the already-listed stocks. They made a distinction between the primary and secondary markets, and present and future values.

But consider the last bit with care. The outflows of the foreign investors, stated the report, spiked during periods of heavy IPO activity. This suggests that institutions were not sticking long to securities in the secondary markets once they made the gains in the primary issues. In effect, the foreigners invested in IPOs, were allotted the shares, or maybe they bagged the shares in pre-IPO deals, and happily sold them after they were listed. They exited from the IPO shares bought in the primary market via the secondary route. These were finicky investors. They were not interested in the long term. The idea was to book immediate profits.

Finally, the current IPO mania is fast developing into a bubble that is likely to burst in the future. This is evident from the performances of the IPOs that hit the market since January 2024. Over the past 20+ months, of the 161 IPOs pinpointed by a global research firm, almost 50 per cent gave listing gains of 10 per cent and below. This implies that 75 IPOs were duds, or are till now. There were no immediate benefits to the shareholders. Another 23 per cent gave returns that were between 10 per cent and 25 per cent. These are impressive returns on investments that were a year or a year-and-a-half ago. However, only a mere 18 per cent of the IPOs were bombers and boomers, and gave returns of more than 40 per cent. More importantly, a quarter of the IPOs showed negative returns.

Convert these percentages into overall averages, and the picture, as presented by the global firm, looks extremely attractive. According to this report, the new offerings “generally outperformed broad market indices: These stocks have beaten Nifty returns in the five of the last seven quarters, with 61 per cent of these (IPOs) outperforming the broader Nifty index in the last six months.” It adds that the average listing gains for the 161 IPOs came to 22 per cent. Then comes the sting in the tail (or tale). The returns, it seems, are “better than for those who held these stocks for three months or longer, where roughly half the stocks have negative returns over the long run.” Obviously, no investor, especially the small one, will buy all the IPOs, and hope for a positive, high average return. Imagine the one, who purchased three IPOs, and each gave negative returns.