For investors who missed the initial IPO frenzy, the market correction is an opportunity to selectively invest in promising names, but patience and careful evaluation remain the key.
It has been a turbulent few months for the Indian stock markets that saw the frontline indices, the S&P BSE Sensex and the Nifty 50 slip over 10 per cent from their peak levels hit in September 2024.
The nervousness also took a toll on stocks of debutants at the exchanges with 57, or 72 per cent of the 79 companies that listed on the exchanges through mainboard IPOs in FY25 trading below their listing price as of March 24, 2025.
Data shows that 45 per cent (36 out of 79) of these stocks are now below their respective issue prices.
So, why are these stocks struggling?
Analysts suggest that the primary factor behind this widespread correction in the stocks of companies that have recently listed is their expensive valuations.
Prashanth Tapse, senior vice-president for research at Mehta Equities, says that many IPOs listed at expensive valuations, which seemed justified at the time due to strong liquidity amid a bullish market.
However, as the broader market weakened, particularly in midcap and small-cap segments, these elevated valuations proved unsustainable, Tapse added.
The performance of IPOs deteriorated notably in the second half of FY25. Since October 1, 2024, 40 IPOs have hit Dalal Street, raising over Rs 1.11 trillion, data suggests.
Out of these, 28 stocks are below their listing prices, while 18 are below their issue prices as per the latest available data.
Even some of the highly anticipated IPOs such as Hyundai Motor India, Ola Electric, Swiggy and State-run NTPC Green Energy have struggled post-listing.
Weak corporate earnings back home, correction in broader markets and global uncertainties, too, analysts believe, took a toll on the sentiment, dragging the stocks of new-listed firms along.
Many IPOs in FY25 benefitted from the overall bullish market sentiment, said Rajnath Yadav, senior analyst at Choice Broking.
However, in the second half, geopolitical tensions and broader market weakness led to reduced retail participation, making it harder for IPOs to sustain their gains, he said.
Second chance
Given the fall, analysts believe there are some attractive opportunities emerging, and for those who missed the IPO wave, this correction could provide a second chance.
Aditya Kondawar, partner and vice president at Complete Circle Capital, said the market correction has sifted weaker companies, leaving stocks of fundamentally strong businesses across sectors less bruised, which presents a valuable buying opportunity.
Echoing similar views, some stocks have now reached reasonable valuation levels, said Tapse, who recommends looking at Emcure Pharma, Niva Bupa and Afcons Infrastructure as potential buys for the long-term.
Yadav suggests investors should target sectors with strong growth prospects.
By following this approach, they can identify shares aligned with high-growth industries.
As the market and these sectors expand, the share prices of companies in these spaces are likely to recover and grow, he said.
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Feature Presentation: Aslam Hunani/Rediff.com
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