We’ve all heard stories about IPOs (Initial Public Offerings) that made investors rich overnight. While some stocks do see big gains on listing day, others end up disappointing. So, what really affects how a stock performs when it lists on the exchange?

Let’s break down the key factors that influence IPO listing gains — in plain and simple words.

1. Overall Market Mood (Sentiment)

One of the biggest reasons IPOs do well or badly is how the stock market is doing at that time. If the market is doing great and investor confidence is high, chances are the IPO will perform well too.

But if the market is dull or crashing, even good IPOs might not see much excitement.

2. Company’s Business and Financial Health

This one’s pretty straightforward. If the company launching the IPO has a strong business, growing profits, and low debt, people are more likely to trust it and invest.

On the other hand, if the company is losing money or its business model is confusing, investors may avoid it.

3. Price of the IPO (Valuation)

Imagine buying something at a higher price than it’s worth — you wouldn’t want that, right?

Sometimes IPOs are priced too high (overvalued), which leaves little room for gains. When an IPO is fairly priced or slightly undervalued, it usually has better listing performance.

4.Demand and Subscription Numbers

If you see that an IPO is getting a lot of attention — especially from big institutional investors — it’s a good sign. Heavy subscription, especially in the QIB (Qualified Institutional Buyer) and HNI categories, usually indicates strong listing gains.

5.Grey Market Premium (GMP)

The grey market is an unofficial space where IPO shares are bought and sold even before the listing. If there’s a high GMP (Grey Market Premium), it usually means people expect the IPO to do well.

But don’t trust GMP blindly — it can be wrong too!

6.The Company’s Brand and Popularity

Well-known companies with strong brand value often attract more retail investors. For example, tech or fintech companies usually create a buzz, and that excitement can drive the price up on listing day.

7. Who’s Managing the IPO (Investment Banks)

Big and reputable investment banks (also called merchant bankers) tend to manage IPOs of solid companies. Their reputation brings in more investor confidence.

Tip: Check who’s handling the IPO. Known names often lead to better-managed offerings.

Final Thoughts

Getting good returns on listing day depends on more than just luck. If you understand what drives an IPO’s success, you can make smarter choices.