There are two fundamentally different ways to approach an IPO investment. The first treats the IPO as a short transaction — apply, get allotted, sell on listing day, pocket the gain, and move on to the next one. The second treats the IPO as the entry point for a long-term equity position in a business you believe in.
Both strategies exist, both have produced real returns for investors, and both have also produced real losses. What has changed significantly in 2025–2026 is the reliability of the listing gain strategy — and understanding why requires honest engagement with the data, not wishful thinking.
The Data on Listing Gains in 2025
India’s primary market produced 108 mainboard IPOs in 2025, raising ₹1.83 lakh crore. The headline numbers were strong. But the return data tells a more nuanced story.
In 2025, 65% of IPOs listed at a profit on day one — a majority, but down from prior years. The median listing gain was 3.8%, compared to 15.2% in 2024 and 16.5% in 2023. The decline is sharp and meaningful: the “typical” mainboard IPO in 2025 delivered a listing gain of less than 4%.
More revealing is what happened after listing. By year-end 2025, 59% of IPOs that had listed during the year were trading below their listing price. Only 41% were above it. The pattern is striking: even IPOs that delivered listing day profits frequently failed to hold those gains in the weeks and months that followed.
Some individual IPOs delivered spectacular listing results — LG Electronics India at 50%, Meesho at 46%, Aditya Infotech at 50%. But the same data shows that these were exceptions rather than the rule, and that even among the big listing winners, very few maintained those gains through the year. High subscription numbers proved no guarantee — VMS TMT subscribed at over 102 times and still listed negative.
In 2026, the average listing gain across 32 mainboard IPOs with available data is approximately 6.56% — a modest recovery from 2025’s 3.8% median, but still far below the double-digit listing gains that characterised 2023 and 2024. The best performer in 2026 so far delivered a 53% listing gain. Several others listed below issue price.
What Has Changed and Why
The era of near-guaranteed IPO listing gains — the 2021–2023 period when strong subscription numbers and retail enthusiasm pushed almost any decent company to 20–40% first-day premiums — appears to have genuinely ended. Several forces explain this.
Retail investor sophistication has increased. More investors read the Red Herring Prospectus and think about valuation rather than simply chasing GMP (Grey Market Premium). The near-collapse of several high-GMP IPOs that still listed flat or below issue price has educated the market.
IPO valuations became more aggressive. Companies and their investment bankers, emboldened by the 2021–2023 boom, priced IPOs at increasingly full valuations that left little margin for listing day upside. When a company is already priced at 60–70 times earnings at the issue price, a listing at 10–15% premium brings the P/E to levels where rational buyers become scarce.
Institutional investors have become more selective. QIBs who once subscribed routinely to maintain relationships and gain allotments have become more discriminating, and their subdued demand in certain issues serves as a visible signal that retail investors are learning to read.
The Case for Listing Gain Strategy
The listing gain approach has genuine appeal and genuine logic, even in the current environment, for investors who execute it correctly.
Capital efficiency is the core argument. Funds are blocked for only 4–7 days from application to listing. If you receive a 10% listing gain and exit, your annualised return on those blocked funds is extraordinary. Even a 5% listing gain on funds blocked for a week represents an extremely high short-term return by any conventional measure.
Risk containment is a second argument. By selling on listing day, you avoid the company-specific risks that accumulate with longer holding periods — management changes, sector headwinds, earnings disappointments, and the dozens of things that can go wrong in a business over months and years. Listing gains are, in a sense, pure market sentiment returns rather than business quality returns.
The strategy works best when several conditions align: the IPO is from a fundamentally sound business with reasonable valuation, QIBs are subscribed heavily (indicating institutional confidence), the GMP is positive but not extreme (extreme GMP sometimes precedes disappointment as sellers materialise at listing), and broader market sentiment is positive.
What kills the listing gain strategy is chasing hype-driven IPOs that are priced for perfection, with all the good news already embedded in the issue price. The 2025 data showing a 3.8% median listing gain suggests that for most IPOs, the listing gain barely covers brokerage on the sale and offers no meaningful return for the blocked-fund period.
The Case for Long-Term Holding
The strongest long-term holding returns from IPOs in India’s history have come from companies that were not necessarily the most exciting listing day stories. Investors who held Infosys after its 1993 IPO, who held HDFC Bank after its 1996 listing, who held Titan after its public offering, compounded returns over decades that make any listing gain look trivial. These are extreme examples, but they illustrate the core principle: the business’s actual earnings growth over time creates far more value than the short-term supply-demand dynamics of the listing day.
The long-term approach treats the IPO not as a lottery ticket for quick profit but as an entry point into a business partnership. You are buying a fractional ownership of a real company with real operations, and the value of that ownership grows as the business grows. The IPO price, in this frame, is not primarily about where the stock opens on listing day but about whether it represents reasonable value relative to the company’s earnings power over five to ten years.
This approach demands more work upfront. You need to actually read and understand the Red Herring Prospectus. You need to assess the business model’s durability, the quality of management (promoter background, corporate governance track record, how they have treated minority shareholders in the past), the competitive position in the industry, and whether the issue price represents fair value relative to listed peers and the company’s own growth trajectory.
The return potential is substantially higher over a multi-year horizon for the right companies. The risk is that you are wrong about the business — and unlike the listing gain trader who is out within a week, the long-term investor sits with that mistake for months or years.
A Framework for Choosing
Rather than treating listing gain strategy and long-term holding as mutually exclusive, experienced IPO investors often segment their decisions by opportunity type.
Sell on listing when: the company’s business is sound but valuation is already full at issue price; the IPO has a substantial OFS component (promoters exiting heavily is a medium-term signal worth noting); the sector is cyclical and current conditions may not persist; or you need capital liquidity within a short timeframe.
Hold for the long term when: the company addresses a large, growing market with a genuinely differentiated model; management has a demonstrable track record of capital allocation discipline; the issue price, even accounting for the IPO premium, represents fair value relative to the company’s five-year earnings trajectory; and the promoter’s post-IPO stake remains substantial (aligned incentives).
The promoter lock-in schedule is one practical indicator worth tracking. Under SEBI’s ICDR Regulations, minimum promoter contribution of 20% is locked for three years. If promoters hold significantly more than the minimum and do not reduce at the first available opportunity, it signals confidence. If the first sign of lock-in expiry is met with heavy promoter selling, that is the market’s verdict that the promoter’s own view of long-term value has changed.
What Actually Works in 2026
The honest answer, given current market conditions, is that neither strategy works on autopilot. Both require genuine selectivity.
The listing gain trader who applied to every IPO in 2025 expecting automatic listing-day profits would have found that the median return barely justified the effort. Those who selected specifically for reasonably-priced IPOs in high-growth sectors with strong QIB participation did better.
The long-term holder who bought every IPO and held for twelve months would have found that 59% of 2025 IPOs were below their listing price by year-end — and below their issue price in many cases. Those who held businesses with genuine earnings growth and sector tailwinds compounded their returns significantly.
The common thread is selectivity. The IPO market in India has matured past the point where participation itself is the strategy. In 2026, both approaches require discipline: research before applying, valuation awareness before bidding, and honest self-assessment about why you are holding after listing.
The investors most at risk are those who sell too early when they should hold (businesses with genuine compounding potential) and those who hold too long when they should sell (companies that priced themselves as growth stories but are delivering mediocre fundamentals). Getting that distinction right, on a company-by-company basis, is the actual work of IPO investing in India’s current market.
FAQs
Q. Is the IPO listing gain strategy still viable in 2026?
Selectively viable, but less reliable than in 2021–2024. The median listing gain for mainboard IPOs fell to 3.8% in 2025, with 59% of IPOs trading below their listing price by year-end. The strategy works when applied to fairly-priced IPOs in strong sectors with genuine institutional demand — it fails when applied indiscriminately to hype-driven, over-valued issues.
Q. Which types of IPOs have historically produced the best long-term returns?
Companies in sectors with large, growing markets, clear competitive differentiation, capital-efficient business models (high return on equity, low debt), and management teams with consistent capital allocation discipline tend to produce the best long-term IPO returns. In India’s market, financial services, consumption, and technology sectors have historically produced the most consistent long-term compounders from their IPO prices.
Q. How important is the GMP (Grey Market Premium) for predicting listing performance?
GMP reflects pre-listing market sentiment from an unofficial, unregulated secondary market in IPO shares. It has some directional value — very high GMP often (not always) precedes strong listing performance; low or negative GMP signals market skepticism. But GMP is not reliable enough to use as a primary investment signal. VMS TMT in 2025, for example, subscribed over 102 times and still listed negative. Always base decisions on fundamental analysis of the company rather than GMP speculation.
Q. Should first-time IPO investors focus on listing gains or long-term holding?
For first-time investors, the listing gain approach has the advantage of limiting exposure to company-specific long-term risk and returning capital quickly regardless of outcome. However, the realistic expectation should be modest — 5–10% gains in favourable conditions, not 30–50%. For long-term wealth building, developing the research skills to identify quality companies at IPO and holding them through their growth journey is more powerful but requires more patience and more work.
Q. How does the T+3 listing cycle affect the listing gain strategy?
India’s mandatory T+3 listing cycle means IPO shares are available for trading within three business days of allotment finalisation, down from the previous T+6 cycle. This reduces the total period your funds are blocked — from application to potential listing-day sale — making the listing gain strategy’s capital efficiency argument slightly stronger. Funds are tied up for fewer days, which improves the annualised return calculation even on modest listing gains.
