An IPO Party, But a Stock Market Hangover

Companies have rarely been keener to sell shares. The people already holding them have rarely had less to show for it.

A recent Economist piece used Hong Kong's TastySounds lollipops – the ones that let you “hear” music through your jawbone as you eat – as a metaphor for the territory's stock market: a sugary, buzzing primary market for new listings sitting on top of a flat, disappointing secondary market.

It's worth asking whether India, in the middle of its own headline-grabbing IPO wave, is throwing the same kind of party – only to wake up with the same kind of hangover.

The short answer: yes, with a distinctly Indian accent.

Why Hong Kong's market feels off, even with IPOs booming

Hong Kong hosted 104 IPOs in the first seven months of 2026, raising about $42bn – more than double 2025's already-record pace, capped by Shein's debut after New York and London fell through.

But the Hang Seng index itself is down roughly 1% this year, one of the worst showings of any major exchange. A hot market for new shares, sitting on top of a flat one for existing shares.

So why would a company go public into a weak market at all?

The Economist draws on two strands of research. One camp of academics treats this as a sign of irrationality or information asymmetry: insiders sell shares when they privately believe their company is overvalued, and outside investors, not knowing this, buy anyway – a classic case of the seller knowing more than the buyer.

But a 2005 paper by Lubos Pastor and Pietro Veronesi offers a more forgiving explanation. Going public is a decision made under genuine uncertainty and, once made, is hard to reverse – a company can't easily un-list itself if the timing turns out badly. Because of that irreversibility, waiting has real value.

That single distinction – “better than before” versus “as good as it gets” – explains why IPO waves so often show up early in a recovery, and can end up straddling, or even sliding into, the next downturn rather than trailing safely behind it.

India is living the same story, at bigger scale

India's version has been running for longer, and at a larger scale, than Hong Kong's. What makes 2026 striking is how far the two halves of the market have pulled apart.

One market is booming. The other is not.

The party is partly due to strong receptions for large recent issues – the SBI Funds Management listing among them – and partly a backlog of SEBI-approved offerings finally coming to market. The pipeline awaiting approval stood at 75 companies worth an estimated ₹2.02 lakh crore.

Which is why the year's fundraising is so lopsided. July and August carried more than two-thirds of it between them, and July on its own set an all-time monthly record. Financial services did the heaviest lifting, posting the sector's best year in a decade on the way to a full-year total of roughly ₹1.76 trillion across 108 mainboard IPOs.

The hangover is that existing shareholders got none of that energy. The Nifty 50 was down about 9.6% by mid-June 2026, having corrected nearly 16% from its January peak, and the Sensex was still down roughly 4% year-on-year on 1 September 2026.

Nor is this one bad year in isolation. Through 2025, Indian benchmarks gained only about 9–10% while comparable markets across Asia and the emerging world rallied roughly 30%. Two years of going sideways, while the queue of companies waiting to list only got longer.

Debut day is cooling too

Where Hong Kong's Shein still closed its first day roughly flat, India's 2025 listings landed shakier: 29 of 83 mainboard listings closed below issue price on debut, some down as much as 35%.

The once-reliable list, pop, sell playbook is getting less dependable even as issuance volumes climb.

So is India just copying Hong Kong? Not quite

The mechanics behind the dissonance aren't identical.

There's one more Indian wrinkle. Foreign institutions were net sellers of Indian secondary equities in three of the last four years – yet their allocations to Indian IPOs kept growing. Domestic capital, fed by record SIP inflows, has simply grown faster and taken over as the anchor bid.

Why companies list even when the market isn't cooperating

Applied to India, the Economist's central point holds up well: a primary-market boom and a soft secondary market aren't necessarily a contradiction.

If going public is a hard-to-reverse decision, and firms can't know in advance whether current conditions are as good as they'll get, then a rational strategy is to list once things improve – not to wait for, or try to time, the peak.

That produces exactly the pattern both Hong Kong and India are showing in 2026: heavy issuance arriving before, or alongside, disappointing index returns, rather than safely after a period of strong performance.

What this means for investors

Figures as reported for the periods named: Hong Kong and Indian issuance data covers the first seven months and FY2025-26 respectively; index moves are to mid-June 2026 and 1 September 2026 as stated. Sources: KPMG, Business Standard, Grant Thornton Bharat, Redseer, EBC Financial Group, Trading Economics, Univest, MarketScreener/Reuters, International Banker.

This piece explains why issuance and index returns can move apart; it is not personal investment advice and names no security as a recommendation. Talk to a SEBI-registered adviser before applying to any offering.