BSE SME IPO Index loses steam in 2025 after four-year surge  

After four years of spectacular gains, the BSE SME IPO Index has lost momentum in 2025, slipping nearly six percent so far. The reversal comes on the heels of a remarkable rally that saw the index surge 1,100 percent in 2021, climb 43 percent in 2022, advance 96 percent in 2023, and jump another 147 percent in 2024.

This year, however, volatility has returned. The index, which touched a record 1,22,298 in early January, now trades about 12 percent below its peak.

According to SVenkat, Founder and Chief Growth Officer at Practus, the marginal decline is within historical ranges. “Volatility is natural in this segment, but the strong pipeline of issues shows both demand from investors and supply from enterprises remain robust,” he said.

Market participants attribute the turbulence to the frenetic rally of recent years, when many companies listed at premiums of more than 90 percent despite weak fundamentals. Retail exuberance, driven by fear of missing out, pushed several counters to dizzying heights before they collapsed. Teerth Gopicon is a stark example: listed in 2024 at Rs 111, it soared to Rs 774 before slumping to Rs 88—about 20 percent below its issue price.

Analysts note that investors are now steering clear of smaller firms without a proven track record, especially in an uncertain macroeconomic environment. The lack of quarterly disclosures—SMEs publish results only twice a year—has compounded the problem, leaving investors with fewer data points to build conviction. Weak governance, fragile business models, and an oversupply of IPOs have further weighed on the segment.

Despite the setbacks, activity in the SME IPO market remains brisk. In 2025 so far, 154 issues have raised Rs 6,800 crore, compared with 240 issues in 2024 that mobilised Rs 8,760 crore. However, listing-day gains have been far more subdued this year. Of the 154 IPOs, around 50 listed below their issue price, 55 delivered single-digit returns, while 49 rewarded investors with sharp gains. By contrast, in 2024, 73 SMEs doubled on debut and 120 logged gains between 10 and 90 percent.

The top performers in 2025 include Indobell Insulations, Avax Apparels & Ornaments, Sawaliya Foods Products, and Fabtech Technologies Cleanrooms, each delivering listing gains of over 90 percent. On the flip side, Arunaya Organics slumped 45 percent on debut, while Jainik Power Cables, Mahendra Realtors & Infrastructure, Essex Marine, Marc Loire Fashions, Valencia India, Supertech EV, and Infonative Solutions fell about 24 percent on listing.

Some analysts argue that the recent swings are not alarming, pointing out that volatility is inherent to SME counters. They stress that while these stocks carry elevated risk, they also offer outsized reward, and investors are gradually adjusting to this trade-off.

“The steady stream of fund-raising underscores the growing importance of the SME platform, even as geopolitical uncertainty adds to market choppiness,” said Vipul Bhowar, Senior Director and Head of Equities at Waterfield Advisors. “The momentum of SME IPOs shows little sign of slowing.”Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.