The Indian primary market is on fire. 2025 has already seen a record number of filings, blockbuster listings, and frenzied investor interest across both mainboard and SME initial public offerings (IPOs). Not only have they caught retail investor interest, but the IPO euphoria is also visible in the investment trends of the institutional investors.
Till July 2025, 163 public offerings have hit the market, looking to raise ₹67,000 crore, according to Prime Database. In August, too, there is no slowdown in the number of offerings, with many big names like JSW Cement, having accessed the IPO market and a few more lined up.
G Chokkalingam, Founder, Equinomics Research, explained that the lure of strong listing gains, higher allocation by institutions and retail investors, along with a greater share of offerings from sectors not impacted by the US tariffs, is powering the IPO boom.
However, as IPO-bound companies soak up massive capital inflows, especially from FPIs and mutual funds, questions are emerging: Is this IPO boom weighing down the broader market? Are the bulls in the secondary market being kept in check? And what are its implications for the Indian stock market?
According to analysts, while IPOs are siphoning liquidity away from the secondary market, the primary market boom is an important feature and a necessary development.
Liquidity Pressure On Secondary Market
Chokkalingam said that a robust IPO market is certainly contributing to the weakness we are seeing in the secondary market.
Liquidity at any point in time is limited, he explained, adding that the IPO market competes with the liquidity that would otherwise chase the secondary market and is one of the reasons pressuring the stock market bulls.
There has been a record IPO filing in both the mainboard and SME segments, along with bearish flows by FPIs in the secondary markets. FPIs have preferred the IPO market over the secondary market in 2025 as they have pulled out around $17.4 billion from listed equities and invested $4.37 billion in the primary market.
The mutual fund industry also demonstrated strong participation in newly-listed companies during the quarter ended June 2025, with total investments exceeding ₹5,294 crore across recent IPOs.
Vaqarjaved Khan, CFA, Sr. Fundamental Analyst, Angel One, said a strong IPO pipeline can pressurise secondary markets as liquidity diversion for marquee investors tends to happen as they often sell existing holdings to raise cash for attractively priced IPOs. This is more pronounced when IPOs are bunched together and large in size, and the investment window is small, Khan said.
There tends to be a valuation reset as well if companies in the primary market are better priced than their listed counterparts, said Khan. This, he believes, results in de-rating in the secondary markets.
Healthy Rebalancing — Not a Threat, but a Feature
Sharing a contrasting view, Harshal Dasani, Business Head at INVasset, said that while short-term market momentum may face occasional pressure, in the long run, a steady flow of quality listings strengthens market breadth, price discovery, and overall stability.
“With SIP inflows exceeding ₹28,000 crore a month and mutual fund AUM at record highs, India is awash with investable capital. If fresh supply through listings dries up, this relentless flow would be forced into a limited set of existing stocks, inflating valuations and creating bubble-like conditions,” he added.
History Shows What Comes Next — Boom, Peak, Correction
This isn’t the first time India’s markets have danced to this tune. “Over the last 30 years, we’ve repeatedly seen a pattern: first a secondary market boom, followed by an IPO boom, and then a correction,” said Chokkalingam.
He warns that IPOs eventually drain liquidity out of the system — especially when a majority of the capital raised goes to promoters through Offers for Sale (OFS) rather than capex or business expansion.
According to Chokkalingam, the eventual correction — often prolonged — begins once liquidity tightens and valuations lose support. “Corrections usually last six months to three years. What brings the market back is time, bottom-fishing, improving valuations, and fresh inflows.”
However, what can eventually pull the Indian stock market bulls out of slumber is the resolution of the US-India trade deal and any rate cuts by the US Federal Reserve.
“On the domestic front, SIP and domestic flows continue to remain strong. Strong quarterly results from heavyweight sectors, coupled with higher liquidity, will then boost Indian equities and take it out of consolidation,” Khan said.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
