Are retail investors losing interest in IPOs amid stock market turbulence? Here’s what latest trends suggest

The prolonged weakness in the secondary market seems to have finally caught up with the primary market, as investor enthusiasm for new issues has notably waned. A majority of IPOs in February witnessed subdued demand from investors, particularly from the retail segment.

Unlike the frenzied participation seen from retail investors in previous months, many offerings, including those in the SME segment, struggled to garner high subscription levels this month and, in some cases, failed to deliver strong listing gains.

So far in February, 10 companies, including those from both the mainboard and SME segments, have successfully raised funds on Dalal Street. However, eight out of these 10 have received a weak response from investors, with retail investors largely remaining on the sidelines.

Seven issues have received a subscription rate of less than 10 times in the retail segment, and only one has managed to secure a subscription rate of 28 times. This marks a sharp contrast to January when 26 out of 29 IPOs saw subscription rates ranging between 54 and 950 times. Notably, 20 issues in January received a subscription rate of over 100 times in the retail category, as per the Trendlyne data.

The poor response to IPOs in February has also resulted in weak debuts, with five out of 10 stocks listing below their issue prices, while two others debuted at the IPO price. Taking the current trading prices of all 10 stocks into account, six are now trading below their issue prices. 

Looking at 2025 data so far, 25 out of 39 IPOs are currently trading below their issue prices, with GB Logistics Commerce emerging as the weakest performer, trading at a 60% discount to its IPO price. It is followed by Davin Sons Retail and Citichem India, both of which are trading 50% below their issue prices, Trendlyne data showed. 

Retail participation in the Indian stock market has grown substantially in recent years. Millennials, in particular, are actively investing in equities, mutual funds, and ETFs. This robust participation has been a key factor behind the unprecedented surge in Indian equities over the past few years.

It has also encouraged numerous companies to raise capital through the stock market to capitalize on the increasing demand from retail investors. However, retail investors, drawn to small-cap stocks and new offerings, have increasingly turned to the SME segment, hoping to double their investments on the listing day.

In recent years, many SME issues have seen their retail portion subscribed up to 500 times, with some cases reaching a staggering 2,000 times. This massive oversubscription has led regulators to impose a listing cap on SME IPOs.

Investor enthusiasm for IPOs may dwindle this year

Commenting on the trend, Vaibhav Porwal, co-founder of Dezerv, said, “Current market volatility poses a significant challenge to the continued growth of new demat accounts. Investors may become more cautious and postpone their investment decisions until the market stabilizes. IPOs will be important but less dominant than last year.”

In 2025, the IPO pipeline remains strong, with 28 SME IPOs and seven mainboard IPOs already in progress, including companies like WeWork that have filed their DRHPs. However, the recent market correction, slow economic growth, and broader macroeconomic concerns have led to an overall cautious investor sentiment.

Porwal further noted that while IPOs will continue to play a crucial role in the market, they are expected to be less dominant than in the previous year. “An oversupply of listings, coupled with a recent market correction, is likely to make investors deploy capital more cautiously. This environment is steering the focus away from a broad-based IPO frenzy toward a more selective approach, with investors favouring high-quality stocks that align with the current macroeconomic conditions,” he added.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.