Misreading Markets: SEBI’s Relaxed Norms for IPOs May Not Be the Best Move
The Indian stock market has witnessed a decline in stock prices since the start of this calendar year, which has impacted primary market fundraising. In the first quarter of 2026, the average funds raised per month through initial public offerings (IPOs) on the mainboard of the exchanges was just ₹5,610 crore, a significant drop from the average monthly fundraising of ₹31,757 crore in the last quarter of 2025.
This trend is also reflected in primary offerings on the SME platform. However, this decline is more in the nature of a welcome market correction, as the primary markets have been hyperactive and frothy over the last two years. The total number of IPOs on the mainboard and the SME platform were 375 and 336 in calendar year 2025 and 2024 respectively, more than twice the average of 126 IPOs per year in the preceding five years.
Primary Markets: A Cycle of Boom and Bust
Primary markets typically go through phases when issuances flood the market, followed by those when offerings dry up. These cycles are influenced by the requirements of the promoters, demand from investors, and the valuations being given to issues by the market. With the market regulator clamping down on equity derivatives trading to check speculation, many retail investors seem to have shifted to primary markets.
The share of IPO allocations to retail investors increased to 23 per cent in FY26 from 19 per cent in FY25. The share of institutional investors declined by 5 percentage points in this period. However, primary issuances are risky for retail investors, since companies here usually do not have a known track record. To learn more about IPO process and how to invest in them, visit our website.
SEBI’s Relaxed Norms: A Move in the Wrong Direction?
The Securities and Exchange Board of India (SEBI) has extended the deadline for making public offers — for companies whose deadline is set to expire between April and September this year. They now have time till end-September. The regulator will also allow companies to cut the size of the IPO by up to 50 per cent without having to follow onerous procedures.
While small companies may be able to weather serious global headwinds, SEBI’s incentives seem overdone, if not a tad premature. The quality of issuances in the primary market has suffered in the wake of speculative activity. Several scams surfaced on the SME platform in 2025 — promoters were found siphoning IPO proceeds, backing shell companies or manipulating stock prices to dump shares.
To read more about SEBI guidelines and how they impact the Indian stock market, click here. The prevailing tepidity was therefore exactly what was needed. The regulator should, in fact, consider tightening regulations on disclosures, scrutiny of offer documents, and curtailing speculation before and immediately after listing.
Conclusion: A Word of Caution for Indian Investors
In conclusion, while the decline in stock prices may have impacted primary market fundraising, SEBI’s relaxed norms for IPOs may not be the best move for Indian investors. The primary markets have been hyperactive and frothy over the last two years, and the quality of issuances has suffered in the wake of speculative activity.
As an investor, it is essential to be cautious and do your research before investing in any IPO. To learn more about how to invest in IPO and the risks involved, visit our website. Indian investors should be aware of the risks involved in primary issuances and should not be swayed by the hype surrounding IPOs.
By being informed and cautious, Indian investors can make smart investment decisions and avoid the pitfalls of the primary market. To stay updated with the latest news and trends in the Indian stock market, follow us on social media and subscribe to our newsletter.