Listing Gains vs Long Term Investing in IPOs
When a company launches its IPO, it attracts two types of investors. One group applies for listing gains, hoping to sell shares immediately after listing at a premium. The other group sees IPOs as an entry point for long term wealth creation. Both approaches have their advantages and risks. In this blog, we’ll break down the differences between listing gains and long term investing.
What is Listing Gain?
Listing gains are the profits earned when IPO shares are sold on the first day of trading, at a price higher than the issue price. Many investors participate in IPOs to earn these quick gains, especially in companies with high market hype.
Why do investors chase listing gains?
- An IPO can deliver double digit returns on the listing day if demand is strong.
- Overhyped IPOs backed by strong brands or popular sectors often debut at a premium.
- Investors can free up capital immediately after listing and reinvest in other opportunities.
Risks of Chasing Listing Gain
- Market sentiment can swing sharply and sometimes IPOs list at a discount.
- Oversubscription doesn’t always guarantee a strong listing.
- Selling immediately might mean missing future growth.
- Prices can drop sharply post listing due to hype fading, leading to losses if one mistimes the exit.
What is Long Term Investing?
On the other side, some investors apply for IPOs with a long term horizon. They evaluate fundamentals, industry prospects and management quality before deciding to hold.
Why long term investing works in IPOs?
- Companies in their growth phase can multiply investor wealth over the years.
- IPOs often bring quality businesses to the stock market.
- Long term capital gains tax is more favorable compared to short term trades.
Risks of long term investing
- Even fundamentally strong companies may fail to achieve projected growth or meet investor expectations.
- Regulatory changes, competition or technological disruption can affect the company’s future performance.
- Overpriced IPOs may deliver slower returns, even if the company is fundamentally strong.
- Market downturns, interest rate changes or economic slowdowns can impact long term returns.
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Case Study
Case Study: DMart IPO (2017)
DMart’s IPO was priced at ₹299 per share. On listing, it delivered 114% gains but investors who stayed invested for the long term saw the stock rise more than 10 times in the following years. This shows the power of patience and strong fundamentals.
Case Study: Paytm IPO (2021)
Paytm’s IPO was India’s largest at the time and investors expected strong listing gains. However, the stock listed at a discount of around 9% and continued to slide. Those chasing quick profits and hype faced losses and as of September 2025, Paytm’s stock is trading at ₹1,254, well below its issue price of ₹2,150.
Case Study: Bajaj Housing Finance IPO (2024)
In 2024, Bajaj Housing Finance’s IPO was issued at ₹70 and on listing day, the price surged to ₹165, giving a listing gain of over 165%. As of September 2025, the stock trades at ₹112, still above the issue price but about 30% below its all time high. This shows that listing gains can be attractive in short term, but long term performance may differ based on valuation and when hype fade away.
Short Term vs Long Term: Which Approach Is Better?
The answer depends on your investment style & financial goals.
- If you prefer quick profits with high risk, listing gains might suit you. But be prepared for volatility.
- If you want steady wealth creation, long term holding is wiser. It requires discipline, research and patience.
Experienced investors frequently book profits on hype driven IPOs but hold strong, fundamentally sound companies for the long term.
Conclusion
IPOs are exciting opportunities, but success depends on clarity of purpose. If you are chasing listing gains, treat it as speculation, not an investment. If you aim for long term wealth creation, choose quality companies and stay invested through market cycles.
The market rewards patience more than speculation. As DMart example shows, long term holding in fundamentally strong IPOs can create multibagger returns, while speculative bets may lead to disappointment like Paytm.
FAQs
- What is a listing gain in IPOs?
Listing gain is the profit earned when IPO shares are sold at a higher price on the day they get listed compared to their issue price. - Are listing gains guaranteed for all IPOs?
No, listing gains depend on demand, pricing and market mood and are never guaranteed. - Why do some IPOs underperform after listing?
Overpricing, hype and weak fundamentals can cause stocks to drop after listing, impacting both short term and long term investors. - Can I combine both strategies?
Yes. Sell part for listing gains and hold part for long term growth, this hedges risk and maximises opportunity. - Why should I hold IPOs long term?
Long term holding helps investors benefit from company growth, compounding returns and better tax efficiency compared to short term trades. - Should beginners chase listing gains or long term growth?
Beginners should focus on long term investing in fundamentally strong IPOs instead of chasing short term listing gains, which are speculative and risky.
