IPO pipeline swells to nearly Rs 4 lakh crore: Liquidity squeeze for secondary markets or valuation reset? Analysts weigh in

India’s primary market is heading into the next phase of 2026 with a massive pipeline of potential initial public offerings (IPOs), raising questions over how sustained fundraising activity could affect liquidity in the secondary market. Mainboard IPOs worth around Rs 3.86 lakh crore are expected to hit D-Street in the second half of the year, according to the Association of Investment Bankers of India (AIBI).

The potential pipeline is around 3.5 times the Rs 1.10 lakh crore raised through 84 mainboard IPOs so far this year, underscoring the scale of fundraising that could lie ahead. In its Mid-Term White Paper, AIBI said around 130 companies have already received approval from the Securities and Exchange Board of India (Sebi), while another 75 companies are at the Draft Red Herring Prospectus (DRHP) stage and awaiting approval.

But the scale of the pipeline is also bringing the question of liquidity into sharper focus. With companies seeking to raise large sums from investors, market participants are assessing whether the primary market could increasingly compete with the secondary market for investor capital, particularly when several large issues come to market around the same time.


Vishad Turakhia, CEO of Equirus Securities, said the surge in IPO activity is having an impact on liquidity in existing listed stocks, although he cautioned against attributing weakness in the secondary market entirely to IPOs.

"The surge in IPO activity is diverting liquidity from existing listed stocks, to an extent. The scale of the primary market has become large enough to compete directly with secondary-market liquidity, particularly during periods when several IPOs come to the market simultaneously," Turakhia said.

September, he said, provides an example of the scale involved. Mainboard IPOs have raised around Rs 38,785 crore through 30 issues, while the NSE IPO alone raised Rs 22,561 crore. The issue attracted bids of more than Rs 90,000 crore, with qualified institutional buyers (QIBs) subscribing 12.68 times.

Turakhia also pointed to a shift in portfolio allocation by foreign investors. "In the first eight months of 2026, FPIs invested about Rs 45,848 crore in IPOs, while selling around Rs 2.7 lakh crore in the secondary market," he said.

However, he added that IPOs should not be viewed as the sole reason for weak secondary-market liquidity. "FPI outflows, global risk factors, elevated US yields, crude prices and currency concerns are also influencing secondary-market flows," Turakhia said.

G Chokkalingam, founder and head of research at Equinomics Research, takes a stronger view of the impact of the primary-market boom on secondary stocks. He said the combination of IPO activity, oil prices and FII selling has already affected liquidity in the secondary market.

"The boom in the primary market has already impacted the secondary market, and it will continue to have an impact. The secondary market is impacted by two factors. One is the oil price, which has weakened the rupee, and the other is FII selling. So, the IPO boom has drained money from the secondary market. In fact, even FIIs are investing in the primary market," Chokkalingam said.

According to him, the scale of FII activity in both the primary and secondary markets is unusual compared with previous cycles. He believes the focus of both retail investors and FIIs on IPOs has created a liquidity constraint for listed stocks.

"The behaviour of retail investors as well as FIIs focusing on the primary market has created a severe liquidity constraint for the secondary market, and they have brought down the secondary market," he said.

However, he believes the same process could eventually trigger a shift in investor preference. Historically, according to Chokkalingam, sustained IPO activity can result in secondary-market stocks becoming relatively cheaper, making them more attractive to investors.

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Chokkalingam said this pattern has been visible across earlier IPO cycles. "At some point, the relative valuation of secondary-market stocks becomes so cheap that people start looking at the secondary market, and the momentum in the primary market comes down drastically," he said.

He expects such a shift to emerge before March 2027, although the timing could vary. "Whether it will happen in one or two months or six months, it will definitely happen before March 2027. Because, historically, it has happened, and it has also happened quite fast," he said.

He, however, does not expect the current trend to continue indefinitely. The impact, he said, could be particularly relevant for the small- and mid-cap segment, where a large proportion of IPOs are concentrated.

"When listed small- and mid-cap stocks become very appealing and cheap—an attractive buy—at some point in time, this relative valuation will attract investors," he said. "So, instead of buying a new stock at a 30–40 PE, they will prefer a stock trading at a 10 PE or 12 PE in the listed space."

He also pointed to signs of weakness in some newly listed stocks. "Already, a lot of stocks are now failing to give a meaningful return after listing. So, already, the trend of weakness—the signs are already visible. It has already made a beginning," he said.

Kranthi Bathini, director, equity strategy at WealthMills Securities, offers a more liquidity-focused assessment. He said domestic liquidity remains strong, supported by SIP flows and the continuing expansion of the investor base.

"Till now, the liquidity has been quite strong, and so has the SIP money. We have also seen a significant number of new Demat accounts opened in the last three months, and more than Rs 2 lakh crore has been raised from the primary market," Bathini said.

He noted that the IPO pipeline has remained strong despite foreign portfolio selling and that investor interest in the primary market has shown renewed momentum even after large issues such as NSE.

However, Bathini stressed that the primary and secondary markets cannot be viewed in isolation. The performance and sentiment of the secondary market remain important for sustaining momentum in the IPO market.

Bathini said investors would ultimately allocate money to segments where they see value, rather than necessarily moving money permanently from the secondary market to the primary market.

"There are different combinations to look at, but by and large, investors would be looking at where the value is. That is extremely crucial," he said.

In the short to medium term, he expects capital to continue moving between different pockets of the market depending on where investors see opportunities. "The hot money will chase different pockets. We cannot say the money will be channelised away from the secondary market," Bathini said.

At the same time, he reiterated the importance of secondary-market sentiment for the primary market. "The fundamental theme is that secondary-market sentiment should be positive for the primary market to be in a euphoric mode. If the secondary-market sentiment is negative, then it will have a ripple effect on the primary market," he said.

Disclosure: This article has been written by Kumar Gaurav, who is not a Sebi-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective Sebi-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here