Instead of chasing IPO allotments, retail investors can capture listing gains through mutual funds. Abhishek Wani explains how fund-driven IPO exposure offers a smarter way to unlock long-term growth potential in India’s vibrant equity market
IPO Mania Meets Mutual Fund Discipline
India’s equity markets have witnessed an unprecedented surge in primary market activity over the last five years. In 2019, IPO fundraising stood at just Rs 12,985 crore. By 2021, that figure had skyrocketed to Rs 1.19 lakh crore—marking a record-breaking frenzy of listings. After two quieter years, 2024 brought IPOs roaring back with Rs 1.69 lakh crore mobilised, according to Prime Database. The momentum has spilled into 2025, with Rs 86,500 crore worth of IPOs raised in the first eight months— almost half of2024’s total. With four months still to go, big names such as Tata Capital, LG Electronics, ICICI Prudential AMC, Credila Financial Services, PhysicsWallah, and Hero Fincorp are lined up in the pipeline, reinforcing India’s position as one of the strongest IPO markets globally.
Yet, behind these headline numbers lies a paradox. Retail investors continue to flock to IPOs hoping for quick listing gains, but most walk away disappointed. The odds of allotment in a hyped IPO are slim due to heavy oversubscription, and even when successful, post-listing volatility often erodes early gains. For every blockbuster like Tata Technologies, there has been a cautionary tale such as Paytm, which debuted at loft)’ valuations only to lose nearly 60 per cent in its first year.
This is where mutual funds have emerged as a smarter channel to ride the IPO wave. Unlike individual investors caught in lottery-like allotment battles, fund houses leverage institutional scale, preferential allocations, and rigorous research to secure stakes in promising IPOs. Investors in equity or thematic funds automatically gain exposure to new listings—enjoying diversification, professional diligence, and smoother risk-adjusted returns.
The IPO Boom and Mutual Fund Participation
The year 2025 began on a cautious note, with global volatility, domestic rate concerns, and market corrections. Only 79 IPOs were listed in the first half, compared to 131 in 2024. But since March, momentum has revived—driven largely by SME and MSME companies tapping the markets. Investor confidence has bounced back, reflected in strong subscriptions and fundraising.
Mutual funds have been at the forefront of this revival. According to Ventura Securities, fund houses invested Rs 5,294 crore in IPOs during the June 2025 quarter alone, with a notable tilt towards small-cap companies. This signals a strategic shift away from the comfort of large caps towards emerging growth stories.
Mutual funds are no longer passive IPO subscribers; they are shaping demand, influencing valuations, and anchoring ownership patterns. Their due diligence on valuations, sector outlook, and governance provides retail investors with a safety net that individual applicants often lack. By entering IPOs through mutual funds, investors avoid allotment uncertainty and post-listing swings, yet still capture long-term growth opportunities.
Crucially, fund houses are not chasing every listing. In June, they abstained from issues like Globe Civil Projects, Arisinfra Solutions, and Indogulf Cropsciences—showing sharper selectivity. This discipline signals a structural shift: mutual funds are emerging as gatekeepers of India’s IPO market, democratising access while keeping speculation in check.
IPO Frenzy and the Retail Investor Dilemma
For retail investors, IPOs are both thrilling and frustrating. The ‘lottery-like’ allotment system in the retail quota often leaves them empty-handed. Take the Nykaa IPO: the odds of allotment in the retail category were just 13 in 100. Even successful applicants got only one lot of 12 shares, no matter how much they applied. To improve chances, some turned to the non-institutional quota—but that meant committing over Rs 1 crore, an impossible barrier for most. And even when shares are allotted, gains are not assured. IPOs tend to bunch up during bull markets, with promoters demanding lofty valuations. History shows that a majority of such listings struggle to deliver long-term wealth. The Paytm fiasco is a painful reminder—investors who held on after listing are still nursing losses of over 20 per cent.
For retail investors, the IPO game has three pain points:
■Access to shares, given oversubscription.
■Selection of quality companies, given limited research access.
■Emotional post-listing exits, which often sabotage long-term compounding.
Mutual Funds: A Structured Alternative
Mutual funds operate very differently. They participate in IPOs through anchor quotas and QIB (Qualified Institutional Buyer) segments, which ensures guaranteed allocations. Instead of hype and grey market buzz, fund managers rely on rigorous research, governance checks, and long-term growth prospects. The results speak for themselves. A CRISIL study (FY19-FY24) found that diversified equity funds participating in IPOs generated 15-18 per cent average annualised returns from IPO-linked investments. In contrast, direct retail investors saw highly uneven results—only 3 in 10 IPOs delivered meaningful gains.
Why Mutual Funds Are Doubling Down on IPOs
The surge in mutual fund participation is not coincidental.
Several structural tailwinds are at play:
■Rising SIP inflows: Monthly inflows now exceed Rs 20,000 crore, giving funds more deployable capital.
■IPO-rich pipeline: With over S300 billion of private equity and venture capital flowing into Indian start-ups since 2016, IPO exits are accelerating. India, the worlds third-largest unicorn hub, ensures a steady supply of listings.
■Alpha potential: IPOs often allow funds to capture mispriced growth stories early.
■Dual opportunity: Funds can benefit from both shortterm listing gains and long-term compounding when fundamentals are strong.
For fund houses, IPOs are no longer opportunistic bets—they are becoming a strategic component of portfolio construction.
Risk-Return: Funds vs Direct IPO Investing
For most retail investors, IPOs are a frustrating gamble—low allotment odds, token share allocations, and post-listing volatility often lead to losses. The Nykaa and Pay tin episodes highlight how hype rarely guarantees wealth creation.
Mutual funds hold the edge by:
1.Access – As QIBs, they secure assured allotments in oversubscribed issues.
2.Selection – Fund managers apply rigorous research on valuations, governance, and growth visibility.
3.Holding power – Unlike retail investors exiting on listing day, funds capture long-term compounding.
Their disciplined approach makes IPOs a portfolio-building tool rather than a speculative bet. For instance, SBI MF entered Zomato, HDFC MF trimmed LIC and Nykaa post-listing, while Nippon India tapped SME IPOs—all examples of structured, research-led participation.
Do Dedicated IPO Funds Exist in IndiaRs
Globally, IPO-focused funds are well established in markets like the U.S. and Hong Kong, where listings are frequent and liquid. In India, however, pure-play IPO funds are rare due to regulatory constraints and liquidity risks. Instead, investors access IPOs through tlexi-cap, thematic equity funds, or PMS strategies. For most retail investors, equity mutual funds with a consistent record of investing in quality IPOs remain the most practical route.
Edelweiss Recently Listed IPO Fund was among the first structured approaches. Launched in 2018 (initially as a closed -ended product), it now invests 80 per cent of its portfolio in 30-40 companies from the 100 most recently listed IPOs. The fund emphasises quality and growth, holding stocks beyond listing gains to capture compounding potential. As of August 2025, its NAV stands at T26-27, delivering approximately 14 per cent CAGR since inception, with 1-year returns of 20-25 per cent.
The fund has delivered approximately 14 per cent CAGR since inception, outperforming the NIFTY IPO Index, though returns are highly cyclical. While 1 year returns can swing sharply (-24 per cent to 52 per cent), holding for 3-5 years has historically rewarded investors with double-digit compounding.
Mirae Asset BSE Select IPO ETF & FoF, launched in 2025, marked India’s first IPO-focused ETF. It tracks the BSE Select IPO TRI, which includes IPOs and spin-offs among India’s top 500 firms. The ETF adds IPOs three months post-listing to avoid early volatility, caps exposure at 5 per cent, and holds for up to five years. It offers diversified, rule-based IPO exposure but is unsuitable for short-term listing-gain seekers. Since Mirae Asset ETF was launched in February 2025, historical returns are not available.
Beyond dedicated products, mainstream mutual funds actively participate in IPOs. In Q1 FY26, mutual funds invested Rs 5,294 crore in IPOs, largely in small- and mid-cap names. Schemes like F1DFC Mid-Cap Opportunities and PGIM India Midcap maintain IPO exposure at 5-10 per cent of AUM.
A Ventura Securities study showed 90 per cent of equity schemes beat the Nifty 50 TRI in Q1 2025 (Calendar Year) due to IPO allocations, though only 41 per cent outperformed their category benchmarks. Invesco led with 81 per cent schemes outperforming, while Mirae, Kotak, Nippon, Edelweiss, Canara Robeco, and Aditya Birla Sun Life also delivered consistent results.
Case Studies of Mutual Fund IPO Allocations
Mutual funds have emerged as disciplined anchors in India’s IPO market, reshaping allocations with a structured approach. Unlike retail investors driven by hype, MFs rely on valuation filters, governance checks, and diversification strategies, balancing exposure across new-age disruptors and traditional businesses.
In August 2024—the busiest IPO month in over two years—10 companies raised Rs 17,000 crore, with MFs contributing a significant Rs 6,900 crore. Nearly 80 per cent of this capital was concentrated in three marquee listings: Brainbees Solutions (FirstCry), Ola Electric, and Premier Energies.
■Brainbees Solutions (FirstCry): MFs invested Rs 2,809 crore, led by SBI MF’s Rs 1,880 crore (approximately 60 per cent of MF inflows). Kotak MF (Rs 299 crore) and ICICI Prudential MF (Rs 232 crore) followed. The allocation underscored institutional conviction in e-commerce and children’s retail.
■Ola Electric: Rs 2,703 crore flowed in from MFs, led by Mirae Asset MF (Rs 849 crore), SBI MF (Rs 497 crore), and HDFC MF (Rs 480 crore). Despite near-term profitability concerns, fund houses viewed this as a strategic bet on India’s EV transition.
■Premier Energies: Attracted Rs 622 crore, reflecting MF alignment with the clean-energy transition.
■Other IPOs: Ceigall India (Rs 278 crore), Unicommerce (Rs 196 crore), and Interarch (^117 crore) highlighted diversification beyond large-ticket bets.
AMC Strategies:
■SBI MF dominated consumer-tech allocations like FirstCry with outsized commitments.
■Mirae Asset led Ola Electric while also pioneering India’s first IPO-focused ETF, signalling a tactical tilt towards disruptive themes.
■Kotak, ICICI Prudential, and HDFC concentrated on large-cap IPOs for stability.
■Axis, Aditya Birla, DSP, and Edelweiss targeted niche mid- and small-cap offerings for tactical alpha.
Together, these allocations reveal a layered market approach— where large funds anchor marquee issues and smaller AMCs carve out opportunities in specialised segments.
Past allocations show both risks and rewards of MF participation. In FirstCry (2024), the post-listing rally of 40-50 per cent delivered strong short-term gains to MFs, while retail investors, squeezed out by oversubscription, missed allocation—illustrating the MF edge. In earlier cases like PolicyBazaar, Paytm, and Go Fashion (2021-22), outcomes were mixed. While Paytm plunged approximately 70 per cent from listing, MFs cushioned losses through portfolio rebalancing—something retail investors often could not manage. Meanwhile, PolicyBazaar and Go Fashion generated 15-20 per cent annualised returns, underscoring the advantage of institutional discipline in navigating IPO cycles.
IPOs in 2025: From Euphoria to Discipline
By 2025, experts broadly agree that India’s IPO market is entering a phase of normalisation after the euphoric boom of 2024. Valuations have begun to act like ‘gravity’, pulling down overpriced issues and rewarding only selective participation. The shift is most evident in the SME space—while SME IPOs delivered 30-50 per cent listing gains in early 2024, average gains dropped to nearly 10 per cent in H1 2025. Ihe message is clear: blind subscription no longer works.
Harness the Power of Mutual Funds
The data leaves little doubt—direct IPO investing brings thrill but not certainty. Retail allotment odds remain low in hyped issues, and post-listing volatility often erodes quick profits. Mutual funds, by contrast, provide a structured and research-driven alternative. Professional managers filter out frothy valuations, spread exposure across multiple listings, and add the benefit of tax efficiency—turning what is often speculation for individuals into a disciplined wealth-building strategy.
For retail investors, the smarter approach is to consider equity mutual funds that actively participate in IPOs. Options range from specialised vehicles like Edelweiss Recently Listed IPO Fund or Mirae Assets IPO F.TF, to diversified flexi-cap and mid-cap funds with selective IPO exposure. Before investing, investors should:
■Check fund fact sheets to track IPO allocations.
■Review performance during past volatile IPO cycles.
■Align fund choice with personal risk appetite and time horizon.
Mutual funds not only capture listing gains but also offer diversification, risk management, and long-term participation in India’s emerging giants. Instead of blocking capital across dozens of applications with uncertain outcomes, retail investors can ride the IPO wave through fund units, SIPs, and professional curation—maximising potential while minimising stress.
Final Word
IPO investing will always carry allure, but excitement must not come at the cost of prudence. Mutual funds offer a balanced, tax-efficient, and research-backed bridge between opportunity and risk. For retail investors, real wealth lies not in chasing every debut, but in harnessing the power of mutual funds to participate in India’s IPO growth story with discipline and confidence.