The BSE Mainboard IPO Index has experienced a significant reversal in 2025, declining over 4% after years of exceptional performance. This downturn marks the end of an extraordinary run that saw the index surge 31% in 2024 and 41% in 2023, with similar strong returns recorded in 2021 and 2020. The current decline reflects volatile market conditions, mixed fundamentals of newly listed companies, and subdued listing gains that have dampened investor enthusiasm for fresh issues.

Index Performance Overview

The BSE IPO index, designed to measure the performance of companies listed on the Mumbai bourse after completing their initial public offerings, has shown remarkable volatility across different periods. Despite a brief negative year in 2022, the index delivered consistent gains from 2020 onwards until the current reversal.

Top Performing Stocks

Despite the overall index decline, several individual stocks have delivered exceptional returns, highlighting the selective nature of the current market environment. The top performers demonstrate that multibagger opportunities still exist for investors who choose carefully.

Significant Underperformers

At the opposite end of the spectrum, several post-IPO stocks have experienced steep declines, with multiple companies falling 40-50% below their issue prices. These underperformers reflect the challenging conditions facing certain newly listed entities.

Market Dynamics and Outlook

The current market environment shows a stark divergence in outcomes, with spectacular winners on one side and significant drawdowns on the other. This dispersion underscores that selectivity, rather than broad-based enthusiasm, is defining the IPO market in 2025. The shift represents a move from euphoria to a more cautious and selective approach among investors.

Rising scrutiny on governance and fundamentals, combined with several issues listing below their offer prices, has contributed to the overall slowdown. Multiple recent IPOs now trade well below their listing levels, reflecting fading momentum and profit-taking after years of quick gains. This moderation signals increased focus on earnings delivery, with companies having weak balance sheets likely facing greater pressure in the current environment.

The reconstitution of the BSE BANKEX index came into effect on December 26, marking a significant expansion in the banking sector representation. Four new banking entities have been added to strengthen the index composition and align with current market dynamics.

New Banking Stock Additions

The latest reshuffle introduces four prominent banking institutions to the BSE BANKEX index:

No exclusions were made during this reshuffle, bringing the total number of constituents to 14. The index now features a revamped weighting structure that caps the top three stocks at 45%, ensuring better diversification across the banking sector.

Strategic Index Restructuring

This update follows an earlier announcement by BSE Index Services detailing revisions across multiple indices, including BSE SENSEX, BSE 100, and BSE SENSEX 50. The inclusion of fresh constituents represents part of a broader index restructuring initiative aimed at realigning composition based on prevailing market dynamics and eligibility criteria.

BSE MD and CEO Sundararaman Ramamurthy previously stated that the exchange is focused on making BANKEX a prominent product by promoting monthly derivatives. The exchange aims to expand monthly derivative offerings with plans to roll out additional products expected to be economically meaningful for the broader market.

Derivatives Segment Performance

BSE has witnessed significant traction in the derivatives segment, particularly since the relaunch of SENSEX derivatives in May 2023. The performance metrics demonstrate strong market acceptance:

According to Motilal Oswal data, these figures reflect BSE's growing competitiveness against NSE's Nifty in the derivatives space. BSE's SENSEX derivatives currently maintain a 99.90% correlation with Nifty, indicating strong product reliability.

Market Outlook and Strategic Positioning

Strategic moves including product introductions, switching expiry days, and deepening index product maturity have contributed to BSE's momentum. Brokerage firm B&K Securities noted that the focus on expanding trading in longer-dated contracts and increasing engagement on non-expiry days aligns with BSE's objective of broadening market depth and improving premium quality.

Swarnabha Mukherjee of B&K Securities emphasized that BSE remains well-positioned to maintain steady growth and market share accretion in the index options space. The market share gains have been driven by new product introductions like SENSEX and BANKEX contracts, strategic switching of expiry days, and focus on deepening SENSEX product maturity.

The index revision and product developments form part of BSE's strategy to sustain its position in the index options space, particularly targeting the FY26-28 window. Incrementally, the exchange expects onboarding of more clients and members, with scale-up in the colocation business to aid derivatives volume growth and premium quality enhancement.