This study examines the phenomenon of IPO underpricing in the Indian stock market and its implications for investors and issuing companies. IPO underpricing occurs when shares are offered at a price lower than their listing price, resulting in initial gains for investors. Despite regulatory oversight by the Securities and Exchange Board of India, underpricing persists due to factors such as information asymmetry, investor sentiment, and market conditions. The study highlights that IPOs listed on major exchanges like the National Stock Exchange of India and the Bombay Stock Exchange exhibit varying levels of underpricing influenced by demand, subscription levels, and company fundamentals. While underpricing enhances investor participation and provides short-term returns, it may reduce the capital raised by firms. The study concludes that an optimal pricing strategy is essential to balance the interests of investors and issuers while ensuring market efficiency.