India’s primary market is witnessing one of its biggest-ever fundraising weeks, with total IPO collections expected to exceed ₹30,000 crore. This marks the largest single-week fundraising in India’s market history. What makes this week particularly notable is that nearly 90% of this massive amount will be raised through just two major issues — Tata Capital’s ₹15,511 crore IPO and LG Electronics India’s ₹11,607 crore offer-for-sale (OFS).
The sheer magnitude of these offerings is poised to suck liquidity out of the secondary market, as investors, both institutional and retail, allocate funds towards these blockbuster IPOs. Analysts suggest that while the primary market is buzzing with excitement, the secondary market may face a short-term liquidity crunch, especially across midcap and smallcap segments.
Despite the stock market ending higher for two consecutive sessions, experts believe this rally may soon lose momentum. The reason lies in tightening liquidity conditions, as investors divert funds from listed equities to upcoming IPOs.
“Secondary markets will see some sluggishness due to a liquidity crunch, especially in midcaps and smallcaps,” said Pankaj Tibrewal, Founder of Ikigai Investments.
According to market observers, midcap and smallcap indices — which have been outperforming in recent months — could see temporary weakness. As liquidity shifts towards new issuances, short-term trading activity in existing shares might reduce, leading to muted price action in the broader market.
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To understand the potential impact, let’s break down the numbers. Both Tata Capital and LG Electronics India are expected to reserve around 50% of their total issue size for Qualified Institutional Buyers (QIBs). That translates to approximately ₹13,559 crore of demand from institutional investors alone.
This figure is well above the average weekly liquidity available with mutual funds, which is typically around ₹8,000 crore. This estimate is based on average monthly equity inflows of ₹30,000–₹40,000 crore this year, with ₹33,400 crore recorded in August 2025.
When we include all domestic institutions — mutual funds, banks, insurers, and pension funds — the average weekly buying capacity stands at around ₹33,000 crore. The two large IPOs alone could consume nearly the entire available liquidity, leaving little room for additional purchases in the secondary market.
As a result, even though institutional investors have remained net buyers through much of 2025, the fund diversion toward IPOs may cause temporary pressure on ongoing trades and existing portfolios.
Foreign Institutional Investors (FIIs) have also been key players in India’s capital markets, but their firepower is not as strong as before. According to available data, FIIs have sold nearly ₹2 lakh crore worth of shares in the secondary market this year. However, they’ve simultaneously invested over ₹40,000 crore into IPOs.
This indicates a clear trend — FIIs are being selective, preferring to deploy capital into new, high-quality listings rather than adding exposure to existing stocks. While their participation adds depth to the IPO market, it further tightens liquidity for the secondary market, particularly for sectors that are already under stress.
The liquidity crunch may deepen as several other IPOs are also lined up in the same week. Alongside the Tata Capital and LG offerings, investors will see a flurry of new issues hitting the market.
Some of the key listings include:
Rubicon Research’s ₹1,377.5 crore IPO, launching on October 9.
Canara Robeco AMC and Canara HSBC Life Insurance, both expected to announce IPOs in the ₹3,000–₹5,000 crore range each.
WeWork India’s ₹3,000 crore issue, which remains open until October 7, has witnessed modest subscription so far.
A series of SME IPOs is also in the pipeline, further crowding the market.
With multiple offerings competing for investor attention, the supply of new equities may temporarily overwhelm available funds, even though long-term sentiment toward IPOs remains positive.
It’s not just institutional investors feeling the pull. Retail investors are also redirecting capital from listed stocks to IPO subscriptions, particularly when big names like Tata Capital and LG are involved.
“IPOs of large companies do create enthusiasm. Many recent issues have also left capital for retail investors to absorb,” said Umesh Agrawal of 360 One WAM.
Adding to this, Viral Shah of Nuvama Wealth noted, “When there’s an IPO rush, the secondary market does feel pressure.”
This behavioral trend means that smaller investors may sell off some of their existing holdings to apply for IPOs. As a result, short-term demand in the broader market can weaken, especially among momentum-driven retail participants.
Despite the concerns, most analysts believe the market will not face a sharp correction. Instead, they view this as a temporary phase of liquidity rotation between primary and secondary markets.
“Liquidity rotation is happening in a measured way,” explained Umesh Agrawal.
This movement of money is not necessarily negative. In fact, it reflects the depth and maturity of India’s capital markets, where investors actively participate in both primary and secondary opportunities.
Moreover, sector-specific trends could soften the blow:
Corrections in banks and the IT sectors are creating valuation opportunities for long-term investors.
The consumer electronics segment is witnessing strong festive demand, supported by recent GST cuts.
These factors could help maintain overall market stability, even as short-term liquidity shifts toward new issuances.
The consensus among experts is that while liquidity may remain tight over the coming weeks, this drain will likely be temporary. Once the IPO subscriptions close and refunds are processed, a portion of the unallocated capital will flow back into the secondary market.
However, until that happens, the midcap and smallcap segments could continue to experience subdued volumes and weaker price momentum. Investors may adopt a wait-and-watch approach, focusing on the outcome of these mega IPOs before resuming aggressive buying.
As Pankaj Tibrewal summarized, “Money supply influences the secondary market. If all new liquidity flows into IPOs, the listed market temporarily loses steam.”
While the massive Tata Capital and LG IPOs are expected to soak up short-term liquidity, market strategists emphasize that this is not a sign of weakness, but rather a natural rotation of funds. India’s capital markets are expanding rapidly, and large IPOs are an indication of growing depth and investor appetite.
Once the current IPO wave settles, liquidity is expected to gradually return to equities, especially if global cues remain stable and domestic inflows stay strong.
For now, the spotlight is firmly on these mega issues, as investors juggle between primary market excitement and secondary market caution.
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