The ultimate guide to trading IPOs in 2025

While reviewing the Indian equity market performance in 2024, we observe a mixed trend in the secondary market. The first three quarters were driven by a broad-based uptrend, whereas the final quarter experienced a slump, accompanied by rising volatility across large-cap, mid-cap, and small-cap stocks. Despite these fluctuations, investor interest in the primary market remained robust and evergreen.

A total of 94 mainboard public issues were launched in 2024 — the highest in any year over the past decade — raising a record Rs. 1,80,650 crore in aggregate. These IPOs continued to attract individual investors seeking substantial listing gains, moreover, 5 issues gained over 100% on Listing Day.

The month-wise distribution of public issues in 2024 reveals December as the most active month, with 16 public issues launched:

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Similarly, over the past ten years, the primary market buoyancy in 2024 stands unparalleled:

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While listing gains is a buzz word associated with IPOs and a reason for many retail investors applying for it, people often find a dilemma whether to just sell on listing and encash the listing gains, or to let the price discovery happen throughout the listing day and then book profits, or to bet on the company’s upside potential and hold the stock, and for how much period to hold etc.

Well, the answer depends a lot on the company specific factors and the extant industry and macro factors. Let's try to gain a bird eye view of what the statistics from IPOs that launched in 2024 reveal and help to navigate these answers.

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We can observe that in 2024, on an average, IPOs have gone up on the day of listing, providing better listing gain payoff on the day’s close than on the very moment of listing. However, what happens if you don’t sell the stock on listing day and hold on to it. Let’s check that out…

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If wished to hold the stock due to the short-term bullish view, the stats in above table favour to keep the position open for 6 months, instead of encashing earlier. Within that period, for the majority of the companies, first two quarters of results would be also announced, giving a further boost in price to a young fast growing company. (Note: These stats may not be comparable due to the difference in number of IPOs.)

However, quite frequent investors grieve over not getting the allotment for IPOs. For IPO companies for which one is optimistic about share price growth shortly, he opts for purchasing the share once they are listed. In this instance, one should just prefer to buy at the listing price and avoid purchasing on listing day close level, unless the stock witnesses a correction on the first day, because we observed in the first table that there are usually incremental returns on the day of listing, which could elevate the cost of acquisition. The point gets further clarified with following

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While above table reflects it is preferable to buy the stock at listing price over the list day close, on deciding the short-term holding period for such acquired stock, alike in the case of allotment, the 6 months period gives a data-supported preference (Note: These stats may not be comparable due to difference in number of IPOs).

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Considering the performance of IPOs launched in 2024, we can have following takeaways:

• To enjoy listing gains of IPO, instead of selling the stock immediately at the point of listing, prefer to sell it on the day close, and enjoy on an average the incremental stock gains due to the trades on the listing day.
• However, if you want to hold the IPO allotted stocks as you have the short-term bullish view, then a 6 months holding period gives better returns.
• In case, if you do not get the allotment in IPO, but have a short-term bullish view for it, then in buying it from open market, just buy it at the list price and not at the listing day close, to not inflate the cost with listing day’s usual price appreciation during the trading hours.
• Again, for such acquired stocks at the listing price, a 6 months period works out as the most attractive holding period.

However, it is to be noted that these inferences are drawn from a small size of 2024’s IPOs, and which may not reflect the same in 2025. Nonetheless, if you make some sense in these outcomes, you can analyse more historical data and come out with further refinement of these inferences.

A Word to Investors:

While 2025 may present ample opportunities for listing gains, it is crucial to conduct thorough analysis of a company’s business model, financial health, growth prospects, and valuation before investing. Equity investments inherently carry risks, and informed decision-making is the key to successful investing.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)