IPOs: Just a Dopamine Rush?

Think about a gym in January.

Every New Year, sign-ups spike. Count memberships and it looks like the whole city is getting fit. Count the people actually on the treadmill in March and you get a very different story.

The stock market has the same problem, and it shows up in three different counts:

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  23.15 crore demat accounts — the memberships. One person can hold several.

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  13.1 crore unique investors — the people holding a membership.

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  4.57 crore active clients — accounts that traded at least once in the past year. The ones who showed up.

23.15 crore accounts — 13.1 crore people — 4.57 crore that traded. Same market.

The answer changes depending on which one you pick.

A strong one, actually.

The cleanest piece of evidence comes from a study of 1.5 million Indian investors. IPO allotments in India are often decided by lottery, which makes it a natural experiment: Two people apply for the same IPO, and luck alone decides who gets shares.

Investors who randomly won an allotment that went up applied for more IPOs afterwards. They also traded more in stocks that had nothing to do with IPOs. Those whose allotment fell did the opposite.

Conclusion: Investors mistake luck for skill.

Look at the rest of the evidence:

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  Ahead of LIC’s IPO in 2022, the government said about 1.2 crore policyholders had demat accounts. The issue came with a dedicated policyholder quota and a ₹60 discount.

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  In SEBI’s study of 144 IPOs between April 2021 and December 2023, about 48% of the demat accounts that received allotments had been opened in 2021–2023.

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  Applications keep hitting records: 61.3 lakh for LIC, 73.3 lakh for Tata Technologies, almost 90 lakh for Bajaj Housing Finance, 97 lakh for Waaree Energies.

In gym terms, the January promo works. People sign up.

Here’s the thing.

If IPOs were the engine of India’s investor boom, you’d expect participation to rise with every big issue.

It doesn’t.

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  In July 2025, SEBI itself said direct retail participation in IPOs had stayed flat for three years — even as average IPO sizes grew.

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  LIC, then the largest IPO in Indian history, listed in May 2022. New demat accountsiThe electronic account that holds your shares. You need one to receive an IPO allotment, and one person can hold several. that month: ~26.5 lakh. That January, with no LIC in sight: ~34 lakh.

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  Paytm, then India’s largest IPO, drew only about 10 lakh retail applicants.

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  In FY26, India saw a record 109 IPOs on the main board — and the NSE lost ~35 lakh active clients.

(In fairness, that coincided with volatile markets and tighter rules on futures and options trading — IPOs weren’t the only thing going on.)

There’s also a geography problem. Gujarat received 39.3% of retail IPO allotments in SEBI’s 2021–23 study. Today, it holds about 8.5% of NSE investor accounts. About 70% of all IPO applicants in that study came from just four states.

That’s not the whole country walking in. That’s a very particular crowd that shows up for IPOs.

So what is driving the rest? NSE credits digital access, simplified KYC and mobile trading, and SEBI’s then-chairman pointed to the flood of first-time investors during the pandemic lockdowns, when markets were soaring too.

Put simply:

IPOs are a trigger, not the engine.

But not every trigger is built the same way.

Start with where the money goes.

When a company raises fresh capital in an IPO, it’s like the gym selling memberships to build a new floor — the money goes into the business.

An offer for sale (OFS) is different: that’s the gym’s early owners selling their stake to the new members. The money goes to them.

Between 2015 and 2025, only about a third of mainboard IPO money was fresh capital — 37% in 2025. In SEBI’s sample of 144 IPOs, 65% of the money raised was OFS.

That’s not wrongdoing - it’s how early investors get their money back.

But it does mean that a new investor walking in through an IPO is often buying from someone who chose that exact moment to walk out.

Does that change who joins, or who stays? No data we’ve seen answers that.

This month gave us a first clue, though.

NSE’s ₹22,562 crore IPO — every rupee of it an offer for sale — closed for bidding on 21 September. Institutions bid for 12.68 times their quota. Retail investors bid for 1.35 times theirs.

Meanwhile, Jio Platforms has filed for the opposite: a 100% fresh issue, mostly to repay debt.

Is that retail number about the structure, the price, or just the size of the issue? One IPO can’t tell us.

Will new investors treat Jio any differently?

Once. And it didn’t end well.

January 2008. Reliance Power opened its IPO - and it was fully subscribed within the first minute. By the time bidding closed, bids worth about ₹7.5 lakh crore had come in for an ₹11,563 crore issue - at the time, the biggest demand any Indian IPO had seen.

Then came listing day. The stock opened 19% up — and closed 17% down.

It never saw its issue price again. Not that year. Not in the decade after.

And India’s investors seemed to take the hint. The NSE’s investor base was around 1 crore at the time.

It took more than a decade to reach 4 crores.

Now, we can’t pin all of that on one IPO. The 2008 global crisis, the inflation of 2010–13 and a weak IPO market all landed in the same window. But the shape is hard to ignore:

And it isn’t just us.

China added more than 30 million new trading accounts in just the first five months of 2015. Between 12 June and 7 July, the Shanghai index fell 32%.

America’s story is quieter, but tells you the same thing. Between 1989 and 2019, the share of American families owning stock went from about a third to more than half. Sounds like a participation boom, right?

Except over the same thirty years, direct stock ownership actually slipped, from 17% to 15%.

Americans did join the market. Just not through the IPO door. They came in through funds.

January rush. Empty treadmills by March.

Three things to watch.

The regulator. SEBI has tightened the rules for small-company (SME) IPOs, and its direction seems clear: keep small, speculative money away from small, speculative issues, while keeping retail access to large, well-known ones. If that holds, the next onboarding wave comes from a handful of mega-issues — not hundreds of small ones.

Jio. Its draft proposes a reservation for Reliance Industries shareholders. That’s an LIC-style promo, and it could pull in first-timers. Then again, LIC’s own effect on account openings was smaller than predicted.

The first bad year. More than two-thirds of India’s 13 crore investors joined after March 2021, which means most have never lived through a multi-year bear marketiA prolonged stretch in which stock prices fall broadly and stay down, usually taken to mean a fall of 20% or more from a recent high.. A mega-IPO that lists badly into a weak market would be this generation’s Reliance Power test.

So here’s where we land. IPOs are the best New Year’s promo the market has. They get people to the counter - and some of them sign up for good.

Whether they keep showing up once the listing-day excitement fades is the part nobody has measured yet.

And for the 13 crore people who just walked in, isn’t that the part that matters?