From IPO frenzy to freeze: Will retail demand rebound soon?

Of late, initial public offerings (IPOs), once seen as a hotspot for retail investors chasing quick gains, have lost much of their earlier appeal.

Of the 14 mainboard IPOs, every second one failed to secure full retail subscription — only Shree Ram Twistex and Bharat Coking Coal Ltd (BCCL) drew strong interest.

IPOs of companies such as Clean Max Enviro Energy Solutions, Sedemac Mechatronics, Omnitech Engineering, Rajputana Stainless and GSP Crop Science had seen subscription of less than 0.5 times (or 50 per cent) of the quota.

Slide in GMP

One key reason for the waning retail interest in IPOs is the sharp decline in grey-market premiums (GMPs). Earlier, GMP was the primary reason luring retail investors into IPOs. As the name implies, the grey market is an unregulated, unofficial market where shares are traded before their formal listing on stock exchanges.

Of the 12 companies listed so far, seven are currently trading below their issue price, with losses going up to around 53 per cent in the case of Shree Ram Twistex. Ironically, Shree Ram Twistex had witnessed the highest retail participation at 76.63 times. On the other hand, BCCL —another IPO with strong retail subscription (79.37 times) — continues to trade at a premium of 47.72 per cent.

As the market experienced turbulence due to the Iran-Israel-US war, retail investors became largely cautious across both primary and secondary markets.

SEBI study

In 2024, in light of the increasing participation of retail investors and the heightened oversubscription, SEBI launched an in-depth study to analyse investor behaviour in main board IPOs, based on April 2021 and December 2023 data.

The study had revealed a “flipping” behaviour among Individual Investors. Individual investors sold 50 per cent of the shares allotted to them by value within a week of listing, and 70 per cent of shares by value within a year.

The study also found a “strong disposition effect”, with investors showing a greater propensity to sell IPO shares that posted positive listing gains, compared to those that listed at a loss. Another interesting revelation was the influence of returns. “When IPO returns exceeded 20 per cent, individual investors sold 67.6 per cent of the shares by value within a week. In contrast, only 23.3 per cent of shares by value were sold when returns were negative.

IPOs, once viewed as long-term investments, have increasingly turned into speculative plays aimed at making quick gains on listing day. The shortened listing cycle of just three days has further boosted investor interest, as funds are returned quickly, reducing the opportunity cost of idle capital. With this faster turnaround, the trend is likely to accelerate, as many investors continue to chase quick, easy profits.

However, with several big-ticket IPOs—such as those from SBI Mutual Fund, National Stock Exchange of India, Reliance Jio, PhonePe, Flipkart, OYO, and Zepto—expected to tap the capital markets, the current weakening sentiment in the primary market is a concern. One hopes that investor confidence revives soon so that large and fundamentally strong companies can attract robust interest.

Before committing funds, retail investors should carefully assess an IPO’s valuation, corporate governance standards, cash flows, and the business’s scalability. Taking a long-term view can benefit both investors and companies. At the same time, companies must price their offerings appropriately—leaving room for investor gains—while upholding high standards of corporate governance.

Published on March 20, 2026