IPOs: Quick Gains or Long-Term Game?

In this insightful story, Siddharth Mane explores whether IPOs truly reward investors with quick listing gains or lasting wealth over time. With India’s IPO market booming, he analyses three years of performance data (2022–2024) to uncover how new listings have fared versus the BSE 500, separating short-term hype from long-term value creation[EasyDNNnews:PaidContentStart] 

Initial Public Offerings (IPOs) often spark excitement among investors chasing quick profits. In recent years, listings like Tata Technologies, which surged over 160 per cent on debut, and Zomato, which doubled investor money before correcting later, have kept the IPO craze alive. While some see IPOs as a fast route to instant returns, others view them as gateways to long-term wealth creation. 

In this article, we’ll explore whether IPOs truly serve best as short-term trading opportunities or as patient, long-term investments—analysing data, trends, and real-world examples to uncover which strategy truly pays off over time. 

In this, we’ll examine the performance of all mainboard IPOs listed between 2022 and 2024, tracking how they fared from their listing day to date. This will help reveal whether these offerings rewarded investors more through immediate listing gains or sustained long-term returns over the years. 

IPO Index vs BSE 500
To understand how IPOs have fared relative to the broader market, we’ll compare the BSE IPO Index with the BSE 500 Index over the past one and three years. For context, the BSE Select IPO Index tracks the performance of companies listed through initial public offerings and spin-offs. It includes newly listed stocks on the BSE, weighted by their float-adjusted market capitalization (with a weight cap.), and removes companies after they complete two years of listing. 

During 2024, the BSE IPO Index (blue line) significantly outperformed the BSE 500 Index (red line). The IPO Index rose about 31 per cent, while the BSE 500 gained around 14 per cent over the same period. The IPO Index showed higher volatility but maintained a clear upward trajectory, especially from May to October, when new listings and strong market sentiment lifted recently listed companies. 

The sharp outperformance indicates renewed investor appetite for newly listed companies in 2024. Favourable market conditions, robust subscription demand, and successful IPOs across manufacturing, tech, and financial sectors likely drove this trend. 

The broader BSE 500, though positive, reflected a more moderate and stable growth pattern typical of diversified mature firms. This suggests that IPO investors benefited from stronger short-term momentum and liquidity-driven gains, though the elevated volatility also implies higher risk compared to established market indices. 

3-Year relative performance from Jan 1, 2022- Dec 31, 2024 

Over the three-year period, the BSE 500 Index (red line) clearly outperformed the BSE IPO Index (blue line). The BSE 500 delivered a cumulative gain of around +45.8 per cent, while the BSE IPO Index rose by approximately +31.6 per cent. The IPO Index showed sharp volatility and declined steeply through 2022 and early 2023, before recovering strongly in 2024. In contrast, the BSE 500 showed a steadier and more consistent upward trend throughout the period. 

The performance gap highlights that newly listed companies struggled in the post-listing phase, particularly during the 2022–2023 correction, when many IPOs faced valuation resets and profit-taking after the pandemic-era boom. Meanwhile, established firms within the BSE 500 benefited from earnings resilience, sectoral stability, and institutional preference, leading to stronger long-term compounding. 

Although the IPO Index rebounded sharply in 2024, its overall return still lagged the broader market, suggesting that shortterm IPO excitement often fades over time, and long-term wealth creation has historically favoured diversified, mature companies over recently listed ones. 

IPO Listing Data Analysis Stats. for 3 Years (2022-2024) 

The IPO performance from 2022 to 2024 presents an interesting contrast between short-term sentiment and long-term market validation. On the listing day, the average gain stood at 24.88 per cent, but the median was only 16.16 per cent, highlighting that while a few IPOs saw spectacular debuts, the majority delivered modest or even poor returns. The maximum listing gain of 195.53 per cent shows that certain offerings witnessed euphoric demand, whereas the lowest of -20.22 per cent and the fact that 76 per cent of IPOs listed negatively underline a general trend of tepid or overvalued launches. Only 22 per cent of IPOs provided positive listing gains, indicating that short-term traders largely faced disappointment despite the occasional blockbuster debut. 

When looking beyond the listing day, the data becomes more insightful. Over time, 40 per cent of IPOs are currently trading above their issue price, while 60 per cent remain in the red, suggesting that long-term investors have had better odds than those seeking quick listing gains. The average till-date return of 54.06 per cent reflects that while many IPOs faltered initially, several recovered meaningfully as business performance and earnings visibility improved. The wide range—from 1176.46 per cent maximum return to -97.62 per cent maximum loss—shows the high dispersion in outcomes and the critical importance of stock selection and timing. 

Overall, this three-year period underscores that India’s IPO market has been driven more by quality and fundamentals over time rather than short-term hype. The data highlights a transition from speculative frenzy at listing to selective value creation later. Investors focusing on strong businesses, robust governance, and sustainable earnings have been better rewarded than those chasing quick listing profits. 

In essence, the IPO market between 2022 and 2024 reflects a maturing investment landscape — one where patience and research have outweighed the allure of immediate gains. 

The comparative data between IPOs and the BSE 500 index over different holding periods reveals a consistent underperformance of newly listed companies relative to the broader market. Over 3 months, IPOs delivered a median return of 4.2 per cent, only slightly below the BSE 500’s 4.5 per cent, suggesting short-term sentiment often supports new listings initially. However, this early resilience fades with time — by 6 months, the gap widens to -5.3 per cent, indicating that post-listing euphoria typically subsides as valuations normalize and fundamentals come under scrutiny. 

The trend continues over 9 months and 1 year, where IPOs deliver 7.2 per cent and 6.2 per cent, versus 12.0 per cent and 12.2 per cent respectively for the BSE 500. This consistent underperformance of 4.8 per cent to 6.1 per cent suggests that the broader market’s diversified and established companies have provided steadier, more reliable returns compared to the more volatile and often overvalued IPOs. 

The data implies that many IPOs may have been aggressively priced, reflecting high investor optimism during the offering stage. As these companies enter the public market, earnings stabilization, execution challenges, and sector headwinds often dampen price momentum. In contrast, BSE 500 constituents benefit from proven track records, scale, and sustained institutional support. 

From an investor’s perspective, this trend underscores that participating in IPOs purely for listing or short-term gains carries higher risk and lower reward compared to holding diversified, mature equities. The pattern also indicates that it takes longer for most IPOs to align with market expectations and prove their business models. 

In essence, the data highlights a key insight: while IPOs can offer selective high-growth opportunities, as a group, they have lagged behind established market performers across all time horizons. Disciplined stock selection and patience post-listing remain crucial for deriving meaningful returns from the IPO space. 

Why Investing in IPOs might be a bad Idea 

The IPO market swings between euphoria and disillusionment — and more often than not, retail investors end up on the wrong side. Investing in IPOs can be a bad idea primarily because they are frequently priced for perfection. Companies and investment Bankers tend to launch IPOs when market sentiment is strong, allowing them to command premium valuations that leave little room for upside once trading begins. 

Post-listing, many IPOs underperform as we saw in the data; this is usually because the excitement fades and investors start focusing on actual earnings, governance standards, and execution risks, often exposing inflated expectations. Historical data shows that a majority of IPOs fail to beat broader indices like the BSE 500 over time, and a significant portion even trade below their issue price after a year. 

Another concern is the lack of historical performance data, which makes it difficult to assess how the company behaves across market cycles. Additionally, liquidity tends to dry up after the initial buzz, trapping investors in underperforming stocks. 

In short, while a few IPOs deliver spectacular returns, the odds are stacked against investors. Prudent wealth creation usually comes from buying quality businesses at reasonable valuations, not chasing new listings. 

How should retail investors actually think about investing in IPOs and analyse them? 

Listing gains in IPOs are not as pervasive as normally perceived. Data shows that only about 22 per cent of companies list at a premium to their issue price, while 76 per cent debut at a discount and 2 per cent list flat. This underscores the importance of a deeper evaluation rather than relying solely on Grey Market Premiums (GMP) as an investment signal. While GMP can serve as a rough margin of safety — with levels above 30–40 per cent often indicating potential for a premium listing — investors should treat it as one of many factors, not the sole criterion. 

A robust IPO analysis requires careful attention to several key elements. Valuation is critical — overpaying can erode longterm returns regardless of short-term listing gains. Financial performance, including profitability trends, debt levels, and cash flows, must be evaluated alongside growth prospects and industry tailwinds. Sectoral positioning, competitive advantage, and the macroeconomic environment also play a vital role. 

Another important consideration is the nature of the issue — whether it is a fresh issue or an offer for sale. A higher proportion of fresh issue is generally positive, as the proceeds go directly to the company for expansion, debt repayment, or other strategic purposes. Investors should examine the intended use of proceeds, institutional subscription levels, anchor investor activity, and the IPO size, along with the quality and track record of the company’s management. 

Given the unpredictability of IPO pricing, a prudent strategy is often to wait until after listing, allowing adequate time for price discovery, before entering at a more reasonable valuation. This disciplined approach helps mitigate risks and improves the likelihood of capturing sustainable returns. 

Conclusion
In conclusion, IPOs may offer the thrill of quick listing gains, but data clearly shows that sustainable wealth is rarely created overnight. With nearly three-fourths of IPOs listing below issue price and consistent underperformance versus the BSE 500, it’s evident that fundamentals often outweighs excitement. Investors should treat IPOs as long-term opportunities rather than speculative trades, focusing on business quality, valuation, and post-listing execution. While selective IPOs can become multibaggers over time, most deliver meaningful returns only after fundamentals mature. Patience, research, and disciplined entry post-listing remain the true drivers of success in the IPO market.

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