The stark divergence reveals a fundamental shift in retail behavior: individual investors are selling existing holdings to chase listing gains and ignore concerns around startup founders and companies tapping into the IPO frenzy at rich valuations.
NSE data shows retail traders turned net sellers in four of the first seven months of FY26, with October 2025 recording the steepest monthly outflow of Rs 12,061 crore. This came after three consecutive months of net buying, indicating a sharp reversal in sentiment. Retail traders’ investment of Rs 29,370 crore in primary issuances during the current fiscal suggests that a significant portion of funds pulled out from existing stocks has been redirected to IPO subscriptions.
India’s IPO market has sustained remarkable buoyancy for the second consecutive year. Capital raised has already exceeded Rs 1.5 lakh crore in CY2025, placing it among the strongest years on record. With multiple issues lined up for December, 2025 is poised to surpass 2024 in total primary market mobilization. The number of IPOs has climbed steadily as well, rising from 57 in 2023 to 86 in 2024, and 93 in 2025, according to YES Securities.
But a troubling pattern has emerged beneath the surface. “A concerning structural trend is the rising share of Offer for Sale (OFS) transactions. In CY2025, OFS accounted for nearly 63% of total IPO proceeds, underscoring that promoters and private equity investors are increasingly monetising valuations. Excluding LIC (which distorts CY2022), the OFS share has been on a persistent upward trajectory, raising questions around the extent of fresh capital being infused into businesses,” said Hitesh Jain of YES Securities.
This means that nearly two-thirds of the Rs 1.5 lakh crore raised isn’t going into company coffers for expansion or operations but flowing into the pockets of existing investors looking to exit at peak valuations.
IPO flipping strategy
Market veteran Dipan Mehta acknowledges the dichotomy in the IPO space. “Not all IPOs are bad. Some of the venture capital funded IPOs, they are coming in a bit earlier than they would have and that is causing some amount of concern amongst investors, especially value investors that they are trading at extremely high valuations,” he said.
Mehta pointed to recent disappointments, noting that companies like Ola Electric, Urban Company, and Lenskart have corrected significantly post-listing. “But by and large for every two or three overvalued IPOs, one or two IPOs do come which are very reasonably valued, which have businesses which are making solid profits as well,” he added.
Critically, Mehta highlighted the driving force behind the IPO boom: “There is a whole class of investors who are totally focused on IPO. They apply IPOs in multiple names or through leverages and then they are flipping it on listing and that particular strategy, that particular activity is still generating very-very good returns.”
He emphasized that as long as this flipping opportunity exists, IPOs will continue to succeed in the market. “There is more than enough capital waiting in the country to be invested as well and these activities are giving very good returns, so it is just causing more and more investors to come into this particular market,” Mehta said.
Market expert Sandip Sabharwal struck a more cautious note, highlighting a valuation disconnect. “Most of the IPOs are tricky. Unfortunately, the valuations at which they are coming are too high and there are two different markets today – one, IPO market where small and medium companies are getting exits or are able to IPO at high valuations and there is a listed space of small and midcaps of very established companies which are actually cheaper than those companies,” he said.
Sabharwal made his preference clear: “For discerning investors it is very clear where you should be investing in. So, I am largely not enthused about the IPO. So, the last IPO which looked okay to me was LG and nothing after that.”
The retail frenzy for IPOs comes at a time when the Nifty is near all-time high but portfolios aren’t because smallcap and microcap indices are still down 9-12% from 52-week high levels.
Over the last five years, individual investors had been stalwart supporters of India’s secondary markets, accounting for more than 35% of total trading activity and registering cumulative net equity inflows of Rs 3.82 lakh crore. Including primary market investments, their total commitment to Indian equities exceeded Rs 5 lakh crore during this period, according to NSE.
The sustained participation in equities over the past five years has aligned with the broader market rally, supported by ample domestic liquidity, a stable macroeconomic backdrop, and continued confidence in long-term growth prospects. It also underscores deeper financialization of household savings and growing recognition of equities as a reliable avenue for wealth creation.
Cautious optimism for 2026
Looking ahead, market strategists recommend a measured approach. Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, suggests a diversified portfolio allocation: “I would prefer to keep a healthy mix of 40:30:10 in equity, precious metals and debt respectively. The remaining 20% will be kept in cash for better entry opportunities in equities at the time of corrections.”
Sheth recommends deploying this cash reserve strategically—10% of capital when the index falls 10% from current levels, and the remaining 10% on a further 10% decline.
Despite the current retail selling pressure, Sheth remains optimistic about market prospects. “With rising liquidity all around, I believe there is a chance of the Nifty surprising us on the upside. I expect it to trade in the range of 24,500-27,500 in 2026,” he said.
The question now is whether retail investors’ bet on IPOs will pay off better than holding onto secondary market positions or whether this represents a classic case of chasing performance at the wrong time, with promoters and PE firms smartly booking profits while retail money pours in.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
