The IPO boom

The secondary share markets have been on a continuous decline since the beginning of the year. During the first nine months of calendar year 2026, the Sensex has dipped from 85,762 to 71,909, a drop of 16 per cent. Nifty 50 has been down by 14 per cent during the same period. This decline has been largely due to geopolitical factors, including the war on Iran started by the US and Israel since 28 February. Factors like climate change and the Super El Niño effect, the swift rise of artificial intelligence with fears of IT companies losing out in a big way, crude oil, drought fears and loss of forex from IT companies have also spooked the FIIs. Ever since the war on Iran, they have been on a selling spree. Since January, net sales in equity were to the tune of R2.69 lakh crore ($28 billion), with the highest sales recorded in March-April.

FPIs reckoned that, besides the risk to equity in a geopolitically charged market, they would also have to reckon with a falling rupee. In fact, the major fear of a sharp depreciation of the rupee following the rise in crude oil saw them unwilling to return to India in a hurry as buyers. While the RBI did rake in huge funds through the FCNR-B exercise, fears continued to persist. The fear of a possible debasement of the US dollar saw several central banks across the globe shoring up their gold reserves. In 2024 and 2025, the central banks are estimated to have bought nearly 2,000 MT of gold. With silver also in demand, the rise in precious metals as an asset class also saw funds being diverted to this asset class in a big way. Indian individuals and HNIs bought an estimated 280 MT, almost a 73 per cent rise in investment buying. Jewellery demand dipped due to the rising prices and volatility seen in this asset class over the last several years.

The economy has, however, shown a greater degree of resilience in the face of mounting challenges. On the macro front, the economy continued to put up a good show. GDP growth for the year 2026-27 is expected to be over 7 per cent. During April to June, the economy posted a growth of 7.6 per cent, driven by strong consumption and rising investment demand. The rise was witnessed across sectors, including automobiles, metals and manufacturing.

In spite of the dip in the indices, investors in India continued to believe strongly in the India growth story. Sentiments remained high. Funds continued to come to mutual funds through SIPs as also in the secondary markets. While the mainline stocks were declining, the small caps and midcaps continued to evince good interest from individual buyers and institutions. P/E of BSE 500 was, in fact, higher at 22x compared with the index-mover stocks BSE 30, which was around 19x, showing the higher expectations built into the prices of small caps and midcaps.

“Over the past six months, while the Nifty has been flat, the midcap index is up 11 per cent and the small-cap index has gained 21 per cent,” says Suhas Harinarayanan, Head of Research, ICICI Prudential AMC. A similar trend is visible even on a one-year timeframe, where the mid and small-caps have delivered positive returns. When it comes to IPOs, over the last few quarters, most of the IPOs which went live have been from the mid- and small-cap space, where the sentiment is relatively buoyant.

Of course, it was not just midcaps and small-caps, but there were select stocks which showed appreciable growth ranging between 30 per cent and 50 per cent. These were largely stocks unaffected by crude oil prices or able to pass on the higher costs to buyers, be it in defence, manufacturing or services. Outliers exist in all markets, good, bad or ugly. The rationale was that there would be quite a few stocks which would benefit from the reconstruction of the shattered economies. Expectations of an early end to the war, possibly before the US elections on November 19, saw bargain buying also contributing to the rise.

Markets continued to remain volatile across the nine-month period, largely sliding downwards. However, despite the challenges in the secondary markets, the IPO market is exceptionally good.

The Great IPO rush

The IPO market is on fire. There is a virtual scramble by companies to raise funds. While we have seen IPO boom years several times since 2000, 2026 promises to be different. And it is not just because of the amount being sought to be raised. One view is that it will be between Rs1.80 lakh crore and Rs2 lakh crore. (See chart)

PSU divestment also gains ground

Besides diversified sectors, even the government is making the best of the IPO boom by divesting small stakes in listed companies. Recently, the LIC divestment saw the government raise more than Rs31,500 crore through the sale of a 6.5 per cent stake in LIC. Earlier, it also divested 2 per cent in Coal India through the OFS route, collecting a neat Rs5,500 crore. It is scheduled to bring out an IPO for Bharat Coking Coal, expecting to raise Rs5,000 crore.

Besides these large divestments, the government has sold part-stakes in Hindustan Copper, NHPC, General Insurance Company, IRFC and Cochin Shipyard. Given the growing demand for PSU shares, the government may well dribble out small stakes in some other companies in a bid to raise additional funds.

If the government does manage to do so, it will raise much more than the targeted amount of Rs80,000 crore, and the total funds raised through the capital market in FY2027 may well exceed Rs2 lakh crore. (See table on PSU divestment, April-August.)

This time it is different!

During every bull run in the secondary markets, it was common to hear that this was a genuine bull run and that it was different from all the previous ones! One may well say that the buoyancy in the primary market in FY27 is also different.

One of the main differences this time is the fair mix of mega issues. The National Stock Exchange has raised upwards of Rs22,400 crore, making it one of the largest IPOs to date. Hyundai raised Rs27,870 crore in 2024. That record may stand for only a few weeks, as Jio Platforms is planning to raise somewhere between Rs35,000 crore and Rs40,000 crore. Manipal recently raised Rs9,375 crore.

Alongside these mega issues are several small- and mid-cap companies, many of them not well known, which are in the race to raise capital and, in the process, seek listing on the exchanges.

“India Inc is in growth mode,” says Deven Choksey, MD and promoter of DR Choksey Finserv Pvt Ltd. Explaining the mix of small- and large-cap companies. He points out: “This growth is now getting reflected in the ancillaries and companies supplying these large-cap companies, which are tapping the capital markets to raise funds for expanding capacities.”

Choksey says there are substantial funds available with investors following tax cuts and lower GST, and that IPOs, now seen as a separate investment segment, provide a good avenue for investment compared with liquid funds, which barely give 3 per cent returns.

Diversified sectors raise capital this time around

In earlier boom periods, one or two sectors were largely instrumental in raising capital. This time, the IPO market is not dominated by any single sector. In the early 2000s, it was largely PSU divestments that really took off. In 2007, it was the infrastructure boom that saw companies such as DLF, Reliance Power and Adani Ports raise capital. This was the year before the US sub-prime crisis spread into a global financial crisis, with several major banks, including Lehman Brothers, coming to grief.

In 2017, the IPO boom was largely fuelled by insurance companies such as HDFC Life, ICICI Lombard, New India Assurance and GIC coming out with issues to raise funds. LIC came out with its maiden IPO in the following year, mopping up Rs20,557 crore.

The tech boom of 2021 saw several unicorns, including Zomato, Paytm, Policybazaar and Nykaa, getting listed. It was the first time in recent years that funds raised through IPOs crossed R1 lakh crore. At Rs1.19 lakh crore, it was a record year.

Even the largest mega issue to date, Hyundai Motors in 2024, which raised upwards of Rs27,800 crore, could not top the total funds raised through IPOs, with the year ending at Rs1.17 lakh crore. The 2021 record was finally broken in 2025, and 2025 and 2026 have been record years, with 2025 raising nearly Rs1.76 lakh crore. The current year may well surpass the 2025 figure, especially because of the three mega issues of Manipal, NSE and Jio.

“One of the reasons for the renewed interest this time around is the lack of alternative investible avenues,” says Asit Mehta, a veteran of the financial markets. He adds that post-tax returns on bank deposits and low-risk debt instruments are too low. Mainline Indian stocks are not giving adequate returns, while property is too illiquid. Hence, investors are flocking to new IPOs.

Mehta says another attraction is the ease of payment and the removal of operational risks, with IPO funds being blocked only in investors’ accounts and post-listing liquidity remaining high. Investors can also enjoy listing gains. All IPOs may not deliver good returns, but, as he puts it, if investors are not “betting all their shirts”, they reckon that putting “one shirt” into each IPO will generate good overall returns.

Ajay Garg, founder of Equirus Capital, a financial powerhouse offering the entire gamut of services, says: “Equity has been moving centre stage over the last two decades, if not more. There has been a sea change in sentiment, especially amongst Indian investors.”

Garg, whose firm Equirus Capital has been the investment banker for seven issues so far in 2026, adds: “Indian investors are smart and savvy and are becoming more loyal, with faith in the long-term growth story of India. Earlier it was the FIIs that used to move the markets; this time it is Indian investors who are collectively influencing the trends in the capital markets.”

Wealth destruction too

It is not that every issue brings good returns to investors. There have been quite a few duds in the market, with investors suffering heavy wealth destruction. One97 Communications (Paytm), which listed its shares at Rs2,150, saw a listing loss of about Rs200, went on to make a 52-week low of around Rs300, and is currently trading at about R1,800. Regulatory challenges and over-hype were largely responsible for the losses. BrainBees Solutions, better known by its brand FirstCry, a retailer of children’s clothing and toys, had issued shares at Rs465. While it listed at R651, it is currently trading at about R168. Some of the other examples are shown in the accompanying chart. However, while investors do lose money in some IPOs, in many others they end up making enough to more than compensate for the occasional losses.

A Balasubramanian, MD & CEO, Aditya Birla Sun Life Mutual Fund, points out that “the trend in pricing is slowly changing. As against the earlier mandate of optimising returns for the promoters, the current mandate is to optimise value for all shareholders.” Bala, as he is often called, also says this is one of the reasons mutual funds are increasingly coming in as anchor investors. “FIIs, which used to come in as anchor investors, are slowly reducing their exposure.” He adds that mutual funds do their own homework and examine fundamentals more thoroughly than retail investors. Sometimes, when promoters are adamant on pricing, mutual funds also give IPOs a miss. “Pricing is a key consideration, as is the long-term sustainability of businesses.”

Grey market

Pricing is one of the key factors determining the success of an issue. Most retail investors are ill-equipped to arrive at a fair price, given that there are often five to seven issues in a single week. In such cases, many retail investors rely on the grey market premium, which gives a fair indication of the likely listing price.

However, in some cases investors lose heavily because of the shenanigans of operators who can manipulate trends to create false demand. Having acquired expertise in gaming the system, these operators are often sought out by unscrupulous promoters or their associates. The rationale is that losing some money in the grey market is more than compensated for if the issue gets oversubscribed many times over despite being mispriced by the promoters. Oversubscription, once regarded as a sign of insatiable demand that would lead to buoyancy on listing, has proved to be a myth on more than one occasion.

The sheer number of IPOs coming to the market within a short period can itself be a challenge for retail investors. For one thing, they have limited funds. After all, as one expert says, how many companies can an individual keep in a portfolio and meaningfully track? Maybe with the new tools of AI, one may not be required to tax one’s brain quite so much! As of now, however, many investors prefer to sell their shares on listing and reuse the funds for the next IPO.

IPOs are becoming increasingly institutionalised, with QIBs and mutual funds really driving the market post-listing. While companies invite anchor investors before an IPO, it is the lock-in period and what follows thereafter that determine the sustainability of the share price. One view is that once an IPO has been listed, after about three months it becomes part of the broader market and its pricing can no longer be viewed in isolation. Like other listed companies, it begins to reflect overall market trends rather than being valued as a stand-alone IPO.

Be that as it may, we are in the midst of a primary market boom year. We have completed half the year, but we are already seeing sustained demand from investors. Merchant bankers as well as the pink papers are laughing all the way to the bank in this record IPO year. One hopes investors will also make good money this time around.

BOX

NSE, Jio and platform companies

NSE was successful in raising Rs22,400 crore, offering shares in a price band of Rs1,700-1,785 per share. The issue, which opened in the third week of September, opened at a premium and made a high of Rs1,885 to gatecrash into the top 10 companies ranked by market capitalisation. In subsequent sessions, it lost ground on profit-taking, going down to Rs1,740.

Most analysts are euphoric, believing that NSE will be seen as a proxy for the Indian markets. Earlier, it was HDFC Bank which had more FIIs than almost any other company and was regarded as the gold standard of governance and fair play. Following the abrupt resignation of its chairman, doubts have been raised and the bank has never fully recovered. The big question is whether NSE will be able to replace HDFC Bank as the company most sought after by domestic and global investors.

NSE is one of the few platform companies with a dominant share of investors trading on its platform. Besides trading, it offers several other services. The same applies to Jio Platforms. The company, which started with telecom, has diversified into several sectors, including healthcare. “Jio is not just a telecom company. Besides entering other sectors, JioBrain will use AI to build an ecosystem that telecom companies can use,” says Choksey, adding that its computing power will also be offered as a B2B service through its enterprise business.

The company already has a marquee list of investors, including Meta (Facebook), Google, KKR, General Atlantic, Silver Lake, TPG, the Saudi sovereign wealth fund and the Abu Dhabi sovereign wealth fund.

While the proceeds from Jio’s IPO will be used to retire debt, the NSE IPO is largely intended to provide a partial exit to some of its existing investors. While both companies will gatecrash into India’s most valuable corporate group, Jio Platforms may well secure a place among the country’s top five most valuable companies.