Meesho Shares Drop 5% as Lock-In Period Ends, Flooding the Market with New Stock

Meesho Shares saw notable weakness on Wednesday as the one-month IPO lock-in period expired and brought fresh stocks into the market, triggering a slide of around 5 percent and a lower circuit situation during early trade. This recent movement has grabbed attention across the stock market as investors dig deeper into what triggered the decline and what it could mean for future price action.

Understanding the Lock-In Period

When a company lists on the stock exchange through an IPO, early investors, including promoters, anchor investors and some institutional buyers, usually agree to a lock-in period. During this time, these stakeholders are restricted from selling their shares in the open market. The main purpose of this period is to provide price stability after listing and prevent early large sell-offs. Once this lock-in expires, previously restricted shares become tradable, increasing supply.

For Meesho Shares, this one-month lock-in ended on January 7, 2026, unlocking approximately 10.99 crore shares, or about 2 percent of its outstanding equity. These shares are now eligible for trading by early shareholders and investors who were prohibited from selling earlier.

It is important to note that lock-in expiry does not automatically mean these shares will be sold at once; it simply allows holders the option to sell in the open market. However, the increase in tradable supply often causes near-term pressure on prices as market participants anticipate selling.

What Happened to Meesho Shares on Market Open?

On the trading day when the lock-in expired, Meesho Shares opened sharply lower and hit the 5 percent lower circuit on exchanges. This decline was triggered by the additional supply entering the market, which in turn increased selling pressure from early investors taking profits or reducing exposure after significant gains from the IPO.

After its debut on December 10, 2025, Meesho’s share price enjoyed a strong start, listing at a premium and climbing sharply within the first few weeks. However, following its all-time highs, the stock retraced and adjusted part of those gains ahead of the lock-in expiry. Even after the drop, the shares still trade above their IPO issue price, showing long-term interest among investors.

Market Sentiment and Selling Pressure

The decision by some early shareholders to sell their shares as soon as the lock-in expired was probably influenced by profit booking sentiment. After a strong initial post-IPO rally, any easing in upward momentum can lead investors to cash in gains, especially in volatile small and mid-cap stocks. Increased supply typically pushes the price lower in such situations.

Broad retail interest in Meesho Shares remains notable, but short-term sentiment shifted toward caution as traders reacted to the sudden increase in available shares. This dynamic is common when lock-in periods end, as was seen in other recent stocks with expiries that led to short-term price swings.

Analyst Views on the Drop

Most brokerage houses and market experts view the recent decline as a technical reaction to the lock-in expiry rather than a signal of deteriorating fundamentals. Analysts note that a sudden increase in tradable shares naturally leads to supply pressure, and not all new holders may choose to sell. Some could hold their positions or sell gradually over time, depending on market conditions.

Brokerages such as UBS have maintained a constructive long-term outlook on Meesho, citing the company’s strong e-commerce model, solid user growth, and potential for monetisation through advertising and fintech offerings. These factors indicate that while short-term volatility is expected, the core business story continues to attract investor interest.

Is This a Normal Correction After an IPO?

Lock-in expiries and subsequent stock price adjustments are quite common in newly listed companies. When an IPO stock has enjoyed a strong initial run, expiration of the lock-in often marks the first major test of market sentiment and investor confidence. Investors should remember that short-term corrections do not necessarily reflect changes in the underlying business.

Meesho’s stock has been volatile since its listing, with large swings in price as early investors assessed valuations and market conditions. This recent drop, following the lock-in expiry, can be seen as part of the stock’s normal price discovery process as the market absorbs additional supply and assesses the company’s performance.

Stock Research Insight: Fundamentals Still Hold Value

Looking beyond the immediate price movement, stock research shows that Meesho’s fundamentals remain intact. The company’s platform connects millions of sellers and buyers across India’s digital ecosystem, with particular strength in social commerce. Despite near-term fluctuations, metrics such as user growth and revenue trends continue to attract positive long-term projections from analysts.

Moreover, Meesho’s strategy to leverage its asset-light model and negative working capital cycle puts it in a potentially strong position for sustainable growth, which remains an important factor for long-term investors.

Should Investors Buy on the Dip or Wait?

Investors considering Meesho shares now face a clear short-term decision: buy the dip or wait for stabilisation. Those with a long-term horizon may view the current decline as an opportunity to accumulate at relatively lower prices, especially if they believe in the company’s core growth prospects and user expansion potential.

On the other hand, traders focused on short-term gains might wait for technical signals of price stabilisation or signs of renewed momentum before entering. Price action near the lower circuit and wider market sentiment should be monitored closely before making entry decisions.

What This Means for the Broader Market

The movement in Meesho Shares highlights two broader themes in the stock market today. First, IPO stocks often experience heightened volatility around key events such as lock-in expiries. Second, investor focus on growth-oriented sectors, including technology and digital retail, continues to influence trading patterns, even as near-term supply and demand dynamics cause price swings.

Conclusion

The 5 percent drop in Meesho Shares following the lock-in expiry was largely driven by technical supply factors and profit booking. While short-term volatility is expected, the underlying business fundamentals remain strong, backed by solid long-term growth prospects and continued analyst interest. Investors with a long-term perspective might view the dip as a buying opportunity, while cautious traders could wait for clearer stabilisation before entering.

Frequently Asked Questions

Disclaimer:

The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.