India’s benchmark Nifty 50 index has been on a steady climb since April despite the US’s tariff pressures and other macroeconomic issues, but IPOs have struggled to deliver consistent listing-day returns to investors.
Listing day is when a company’s shares debut on the stock exchanges following an initial public offering. The difference between the share price on listing day and the price at which the shares were sold during the IPO is keenly watched, especially by investors who’ve bet their money on the company’s growth.
Average listing-day returns have swung from 9.1% in May to 10.8% in June, 15.6% in July, and 10.6% in August, show data from Prime Database. (See chart below.)
And while the Nifty 50 has gained 5.2% so far in 2025 (as of 9 September), the Nifty IPO index has declined 1.2%, per Capitaline data.
But how important are listing-day returns for investors? Mint explains.
What factors influence listing-day returns?
Listing-day returns are driven by a wider set of factors than just the market’s trajectory, explained Hari Shyamsunder, vice president and senior institutional portfolio manager at Franklin Templeton Emerging Markets Equity, India.
IPO pricing, sector appetite, anchor investor participation, and retail sentiment all influence a stock’s debut performance, making IPO listing-day pops only partly a reflection of index momentum.
Listing-day returns can also be linked to the broader market environment, added Keyur Majmudar, managing partner and chief investment officer at Bay Capital.
Have tighter markets taken the shine off stock debuts?
Over the past year, the Nifty 50 is down about 1% (as of 9 September), which could well be one reason why IPO listing-day gains have been tepid.
Market consolidation has certainly played a big role, said Vinay Jaising, chief investment officer and head of equity advisory at ASK Private Wealth, referring to when equity markets trade within a range, signalling investor indecision.
“We understand some of these IPOs had realistic pricing discovered during the process of listing, and certain investors in the unlisted market could have made negative returns had they acquired the unlisted stocks closer to the listing date (6 months), which would be an impact of market consolidation,” said Jaising.
He added that while systematic investment plans by investors into mutual funds accounted for only 7% of the capital inflow in IPOs in May, it increased to 20% in June and 89% in July.
Should investors be worried about low listing-day returns?
Listing-day returns are purely a short-term phenomenon and hardly a reliable measure of a company’s business quality, market experts said. Quarterly earnings and management commentary following an IPO—better indicators of a company’s wealth-creation potential—determine how a stock will perform in the long term.
For true long-term investors, listing-day returns are largely irrelevant, said Sahil Kapoor, head of products and market strategist at DSP Mutual Fund. Even for retail participants, or individual investors, chasing listing-day gains does not qualify as investing. “That is trading,” he quipped.
That said, “average listing gains can be a useful guide for investors looking to exit, as they offer a clear sense of market sentiment”, Kapoor added.
Will inconsistent Day One pops change a company’s IPO plans?
Companies are unlikely to change their listing plans solely on the basis of debut-day gains, said Majmudar of Bay Capital, adding, however, that “the broader secondary market environment does play a role in how a company times and prices its IPO”.
Secondary market refers to investors trading already issued securities like stocks and bonds on exchanges such as NSE or BSE.
Shyamsunder of Franklin Templeton added that companies banking on sentiment-driven demand may hold back their IPO plans if listing-day returns are muted.
However, fundamentally strong companies with credible growth trajectories are less likely to alter their IPO plans since their objective extends beyond a one-day pop to long-term access to public capital, he added.
Shyamsunder pointed out that the Nifty IPO index had delivered a 13.9% compound annual growth rate in the five years through 31 August, well below NSE 500’s 21.7% CAGR. This underscored that while some investors might focus on a stock’s first-day performance, a longer-term gaze may make one more selective.
According to Jaising of ASK Private Wealth, companies considering an IPO may rethink their strategy, “especially when it comes to valuations”. For an IPO to succeed, companies must leave enough money on the table as well as avoid crowding the market as was the case in June and July, he added.
