The Emotional Rollercoaster of IPO Investing
Written by Dev Sethia
2 min read | Updated on November 25, 2025, 16:02 IST
Emotional Rollercoaster of IPO Investing
From panic selling during a market crash to rushing into a hyped public issue on a friend's tip, the behavioural patterns continue to shape how retail investors participate in India's booming IPO market.
At the root of investors failing to capitalise on an IPO opportunity, or sustaining avoidable losses, lies emotional investing-that is, fear, greed and herd behavior.
While IPOs promise quick listing gains and the excitement of owning early-stage shares of promising companies, market experts warn that emotional impulses often override rational decision-making.
What Emotional Investing Looks Like in IPO Markets?
The psychology of investing reveals that two key emotions-greed and fear-are the drivers for many of the common mistakes in IPO participation.
Greed makes investors chase the "hot" IPOs with no analysis of fundamentals, often investing in overvalued companies just because everyone else is doing so.
On the other hand, fear causes them to sell in panic shortly after listing, even when the long-term outlook of the company remains intact.
The IPO Market Cycle
Knowing why investors behave impulsively requires taking a step further in understanding how emotions fluctuate in an IPO cycle, from launch to listing and beyond.
When IPO Sentiment is Bullish
Investors tend to start optimistic during a bullish phase in the broader market or when recent IPOs list at high premiums. As demand for new issues starts growing, excitement builds up-especially when grey-market premiums surge.
When IPO Hype Begins to Fade
Not all IPOs list at a premium-and that is where investors' emotions take a dramatic turn.
If a newly listed stock falls below its issue price, the investors normally move from anxiety to denial-a belief that the price will bounce back immediately. Further weakness leads to fear, followed by desperation, and finally, panic selling.
When IPO Stocks Start Recovering
Finally, the market clears up, and the stocks start to rise again. At this point, this creates more hope and relief, even for those who were still invested. Optimism often returns, and the cycle repeats, sometimes pushing investors again toward impulsive decisions in future IPOs.
How Investors Can Break the Emotional Pattern?
Experts agree that disciplined strategies can help mitigate emotional investing. With the continued attraction of retail participation to IPO markets, the ability to keep one's emotions in check will be key.
Focus on Good Investment Returns
Investors should look to business fundamentals over the longer term, not day-to-day swings of stocks. Applicants for IPOs should do some real due diligence regarding the underlying company, the competitive advantage it enjoys and its financial health.
Timing the Market
Timing entry or exit from an IPO rarely works. The exact listing-day price is unpredictable, determined by market conditions, liquidity and institutional participation.
Instead, investment experts recommend systematic exposure to equities through SIPs in diversified funds. This reduces the tension associated with market ups and downs and curbs emotional reactions.
Do the Research Ahead of Investing
Hype, chatter on social media, or friend tips often lead to misjudged decisions. On the other hand, a well-researched investment approach considers the financial statement of the company, risks from DRHP and comparisons in valuations with peers to select an IPO that fits in with one's risk profile and long-term goals.
Invest Based on Goals, Not Emotions
Every investor has his or her personal financial goals, risk tolerance levels, and time horizons. Aligning IPO investment with these goals prevents impulsive decisions.
Why IPO Volatility Should Not Be Feared?
Bullish, bearish, and neutral market cycles are inevitable. Price discovery, institutional selling, and the aggregate market sentiment will ensure that each IPO stock experiences post-listing volatility.
Psychology in investing essentially proves that the biasing of cognitive factors often misleads people, but awareness and discipline can definitely make a big difference.
The rise in IPO participation in India indicates a growing appetite for investment in the stock market as well as the emotional vulnerabilities of retail investors. So long as bullish and bearish cycles influence sentiment, emotional investing is bound to be a challenge.
About Author
Dev Sethia
Sub-Editor
a journalism post-graduate from ACJ-Bloomberg with over three years of experience covering financial and business stories. At Upstox, he writes on capital markets and personal finance, with a keen focus on the stock market, companies, and multimedia reporting. When he’s not writing, you’ll find him on the cricket pitch
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Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.