There are a lot of opportunities to earn wealth when investing in the stock market, but to a first-time investor, choosing the right avenue can be daunting. In India, two primary channels reign supreme in the equity investment arena: the upcoming IPO market and the secondary market. Both have a particular function to play and cater to different investor needs, risk appetites, and investment goals.
This blog studies the key differences between upcoming IPOs and the secondary market, offering an insight into their mechanism, risks, advantages, and suitability for a first-time investor in India.
Knowing these markets, you will be in a position to make an informed investment decision about where to start your investment journey.
Understanding the Upcoming IPO Market
The upcoming IPO market is also known as the primary market. It is where companies offer new securities to the public for the first time to raise capital. Private companies become public entities through this channel, which they can use to fund expansion, pay off loans, or purchase new businesses. Securities are directly bought from the issuing firm, pumping new capital into the firm.
In India, the future IPO market has been active, with 96 flagship deals and 241 small and medium enterprise (SME) IPOsraising a record ₹1.71 trillion in 2024 as per the PRIME Database. This growth demonstrates increasing investor interest and a sound economic climate.
Understanding the Secondary Market
The secondary market is where outstanding securities, such as shares and bonds issued in the past, are purchased and traded by investors. In contrast to the future IPO market, the issuer does not receive money from sales. In India, the secondary market comes in the form of the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), where listed company shares are traded and purchased based on the level of demand and supply.
In 2024, the NSE reported that over 3.5 million new retail investors subscribed to the secondary market, increasing the number of investors to 108.5 million by November. The rise is a testament to the convenience and liquidity of the market.
Comparing Upcoming IPOs and the Secondary Market
| Aspect | Upcoming IPO | Secondary Market |
| Nature | New securities issued by companies | Trading of existing securities |
| Purpose | Raise capital for companies | Provide liquidity to investors |
| Pricing | Fixed price or price band | Market-driven, based on supply and demand |
| Risk | High (volatility, oversubscription) | Moderate (market fluctuations) |
| Returns | Potential for high gains, but uncertain | Steady returns are possible, but volatile |
| Investment Type | Retail, institutional, and anchor investors | Retail, institutional, and high-net-worth individuals |
| Regulation | Strict SEBI oversight with DRHP/RHP filings | Regulated by SEBI, with exchange oversight |
Where Do Beginners Start?
For first-time Indian investors, whether to start with the upcoming IPO or the secondary market depends significantly on their understanding of their financial objectives, risk tolerance, investment goals, and resources available for learning. Both have their respective strengths and weaknesses, and the right choice calls for a balanced approach tailored to specific situations.
With the dynamic financial markets of India, with 96 mainline future IPOs and an expansion of 108.5 million retail investors on the secondary market, new investors have great opportunities but need to proceed carefully.
Why Start with Future IPOs?
Upcoming IPOs provide an opportunity to invest in companies at the listing price, which can end up providing extremely high returns if the company performs well after listing.
For instance, the Mamata Machinery IPO in 2024 provided massive listing gains with high demand. Early access is desirable for beginners who want to invest in high-profile issues.
IPOs are also an educational experience, as learning through Draft Red Herring Prospectuses (DRHPs) teaches beginners about company fundamentals, financial strength, and growth prospects. SEBI’s stringent rules make IPOs transparent, such that IPOs are accessible to retail investors through platforms like Motilal Oswal.
There are risks in the upcoming IPO, however. Over-subscription results in allotments of restricted shares, especially for the retail investor, and post-listing price fluctuations can translate into losses when the sentiment in the market shifts. New investors must hold on to blue-chip IPOs and steer clear of speculative SME IPOs unless they are willing to take high risk.
Why Start with the Second Market?
The secondary market, trading via the BSE and NSE, provides liquidity, flexibility, and diversification, a more secure launching pad for most beginners. With more than 3.5 million new retail investors entering the market in 2024 (NSE), the accessibility of the market is clear.
Investors can buy stocks of proven players such as Reliance or Infosys, minimising the risk involved in untested ventures. Back data, research reports, and low-cost brokerage sites (such as Motilal Oswal) enable newbies to make informed choices. The facility to enter and close positions quickly is ideal for those with shorter investment goals or lower risk appetites.
Nevertheless, the second market is not free of flaws. Price volatility due to market sentiment, economic conditions, or international cues could affect returns. Newcomers must analyse company performance and market patterns to avoid risks.
Conclusion
The upcoming IPO and the secondary market correspondingly offer excellent opportunities to Indian investors. The IPO market is the right place for seeking early investments with high return opportunities, while the secondary market provides liquidity and diversification for stable long-term growth.
New investors should review their risk appetite, conduct proper research, and use SEBI-regulated platforms to make well-informed decisions.
With the IPO market in India poised to mobilise ₹1.54 trillion in 2025 and rising retail investor levels, there are more than sufficient opportunities for creating wealth in both markets in 2025.
FAQs
1. How is an upcoming IPO different from the secondary market?
An upcoming IPO is the purchase of new shares from a company directly to raise funds. In contrast, the secondary market is the trading of already existing shares among investors on stock exchanges such as the BSE or the NSE.
2. Are secondary market investments safer than upcoming IPOs?
Yes, upcoming IPOs are riskier with possibilities of oversubscription and post-listing volatility, whereas secondary market investments are price-volatile but provide diversification and liquidity.
3. How do I apply for the next IPO in India?
You need a demat account, a trading account, and an ASBA-linked bank account. Apply through brokers like Motilal Oswal or ASBA during the IPO subscription period.
4. What are the benefits of investment in the secondary market?
The secondary market offers liquidity, freedom to buy/sell at will, and access to many established firms, reducing the risk of untested ventures.
5. What is the probability of an IPO allotment?
Apply early, tender at the cut-off price, and apply under the shareholder category if the parent company is listed. Read the DRHP carefully in order to make informed decisions.
