Market correction unlikely to faze India's booming IPO market that has a 1000-offer pipeline

The recent market downturn is unlikely to have any impact on the primary market activity with analysts bullish on the number of companies tapping public markets will only grow higher.

As per a report by Niveshaay Investment Advisors (a smallcase manager), Indian markets will witness approximately 1,000 IPOs in the next two years across various sectors. A similar forecast was done by the Association of Investment Bankers of India (AIBI) earlier.

Some of the marquee names that could hit the markets include Reliance Jio, Zepto, LG Electronics, Ather Energy, JSW Cement, NSDL, and boAt.


These offerings cover a wide range of sectors, including telecom, electric vehicles, consumer electronics, and infrastructure, showcasing the diverse growth opportunities in India’s financial landscape.

The excitement around IPOs often attracts both institutional and retail investors, looking to capitalize on potential early-stage gains.

However, Niveshaay says the valuation at which an IPO is priced plays a crucial role in determining its post-listing performance.

"While some IPOs generate substantial listing gains, others struggle to sustain their issue price. Understanding how IPOs are valued and their typical listing behavior can help investors make informed decisions," the smallcase manager said.

During bullish market cycles, companies tend to command higher valuations, often leading to stretched pricing. In contrast, during bearish phases, IPOs may be priced conservatively, creating better entry opportunities.

Large IPOs, while offering attractive investment opportunities, impact overall market liquidity by absorbing capital that would otherwise circulate in the secondary market.

"When institutional and retail investors allocate funds to a major IPO, liquidity is diverted from existing stocks, particularly in mid and small-cap segments, leading to short-term corrections and price fluctuations. This shift in liquidity can reduce trading volumes, widen bid-ask spreads, and create temporary pressure on stock prices," the investment manager said.

Given the profound impact of liquidity on market dynamics, Niveshaay advises investors must carefully assess liquidity risks when navigating large IPO events. A well-thought-out allocation strategy ensures that capital is efficiently deployed, balancing participation in new opportunities while mitigating potential disruptions in the secondary market.