Industry Odisha Bureau, Sep 07: India’s markets show a strange split. Fresh capital keeps flooding in, yet listed stocks barely move. The India IPO market is booming. New share sales are absorbing cash almost as fast as it arrives.That raises a pointed question. Is India short on liquidity, or is liquidity simply going elsewhere?
The paradox
Between January and July 2026, net equity inflows totalled INR3,02,044 crore. FPIs, DIIs, and individual investors together supplied this capital. Over the same period, companies raised INR3,03,795 crore. This came through IPOs, OFS, QIPs, and preferential allotments, according to an ET Prime analysis. In effect, new issuance absorbed nearly all fresh inflows. Little was left over for existing listed shares.
Analysts argue this, not foreign selling, is driving India’s underperformance. The India IPO market’s sheer scale appears to be the bigger factor.
Samir Arora’s IPO boycott argument
Samir Arora, group CIO and fund manager at Helios Capital, has floated a provocative idea. He suggested mutual funds boycott every upcoming IPO for 30 days. Arora made the comment in a recent television interaction. He framed it as a thought experiment, not a formal policy call. His logic: fewer IPO subscriptions could free up cash for existing stocks. That, he argued, might help lift the sagging secondary market.
Arora also pushed back on a common narrative. He noted FPIs have actually been net buyers over the last two months. Net FPI inflows in July and August came to around INR47,000 crore, per available data. This undercuts the idea that foreign selling alone explains India’s weak returns.
Where is the liquidity going?
The theory is straightforward. When primary issuance is unusually heavy, investable cash tends to chase new securities first. IPO subscriptions, anchor allocations, OFS deals, QIPs, and preferential allotments all compete for the same pool of capital. Fund managers must decide where to deploy each rupee. This does not mean every rupee raised directly leaves the secondary market. The relationship is more indirect than that. Still, when issuance volumes stay this high, something has to give. Right now, that appears to be momentum in existing listed shares.
The fundraising rush
The IPO pipeline is only getting busier. A record six IPOs are set to launch on September 9 alone. Bankers estimate these six issues will raise about INR4,511 crore combined. September overall could see IPO fundraising near INR25,000 crore. Nearly 25 companies are currently in the pipeline. Many issuers are rushing to list before their Sebi approvals expire.
October could bring an even bigger wave. Bankers estimate the Jio IPO could raise around INR37,800 crore. That would make it India’s largest-ever public issue. It would surpass the proposed INR31,000-crore NSE IPO. Preferential allotments currently lead fundraising activity. QIPs and IPOs follow closely behind, based on the available data.
FPI, DII and retail flows
Each investor category tells a different story. Together, they explain the paradox at the heart of the India IPO market. FPIs turned net buyers in July and August, adding roughly INR47,000 crore. This makes it harder to blame foreign investors for weak index returns. DIIs remain the dominant force behind India’s equity inflows. Much of this reflects steady, SIP-driven mutual fund participation.
Individual investors have also stayed engaged. Their continued participation reflects rising household exposure to equities. Yet strong domestic liquidity has not translated into strong index gains. That disconnect is the core puzzle analysts are trying to explain.
The SIP engine
India’s SIP ecosystem remains remarkably resilient. Average monthly SIP inflows rose to INR31,283 crore in Q1 FY27. That marks a 1% rise quarter-on-quarter. It also represents a 16.5% jump year-on-year. Notably, this was the 23rd consecutive quarter of sequential SIP growth. Rolling quarterly growth has stayed positive since November 2020, according to NSE.
This points to a structural shift. Domestic households keep feeding capital into equities, regardless of short-term market mood. But that steady inflow has not been enough. It continues to get absorbed by the primary market’s expanding appetite.
Government disinvestment adds supply
The government has also leaned on the market’s appetite. It has sold shares through OFS in several public-sector companies. These include Coal India, NHPC, and General Insurance Corporation of India. Hindustan Copper, Cochin Shipyard, and IRFC also featured in recent sales. In August, LIC’s OFS raised nearly INR31,514 crore on its own. That was one of the year’s largest single transactions.
Overall, the government has raised INR55,757 crore via disinvestment this fiscal year. Most of it came through the OFS route. Each such sale adds to the pool of shares competing for investor capital. This applies pressure similar to that from private issuers.
Nifty 50 versus Nifty 500
The performance gap between India’s benchmarks is telling. During the first seven months of 2026, Nifty 50 fell 3.7%. Nifty 500, a broader index, rose 1% over the same period. That divergence hints at uneven market breadth. Large-cap stocks appear to have borne the brunt of weak sentiment. Broader market performance has held up somewhat better, comparatively. However, this gap should not be overinterpreted. IPO activity alone cannot fully explain the difference between the two indices.
Can slower IPO activity revive the market?
This is the central question the India IPO market now faces. There is no simple yes-or-no answer. Slower primary issuance could theoretically redirect capital toward existing stocks. That might ease supply pressure and support secondary-market momentum. Reduced competition for capital could also sharpen investor focus. Existing companies might receive more attention from fund managers.
But moderation in IPO activity is not a guaranteed fix. Multiple other factors matter for market performance. Valuations matter. Earnings expectations matter. Global risk appetite, sector rotation, and macroeconomic conditions all matter too. Correlation between heavy issuance and weak returns does not prove causation. Analysts argue primary-market supply may have competed with available liquidity, but other forces are also at play.
What investors should watch
Several indicators will shape the India IPO market’s next phase. Investors may want to track these closely.
1. The IPO pipeline and upcoming issue sizes
2. Monthly equity fundraising totals
3. FPI flow trends
4. DII flow trends
5. SIP collection data
6. OFS transaction volumes
7. QIP activity levels
8. Preferential allotment trends
9. Nifty 50 performance
10. Nifty 500 performance
11. Secondary-market turnover levels
12. Overall market breadth
Each metric offers a piece of the puzzle. Together, they reveal whether liquidity pressure is easing or intensifying.
Conclusion
India’s capital markets present a genuine paradox. Liquidity is abundant, yet the India IPO market keeps absorbing most of it. The question is not simply about more or less liquidity. It is about balance between fresh issuance and existing shares. Better valuations, stronger earnings, and steadier global sentiment could all help. So could a more measured pace of primary-market fundraising.
Whether Arora’s boycott idea gains traction remains uncertain. But the debate it sparked highlights a real structural tension in Indian equities. For now, the India IPO market and the secondary market remain locked in an uneasy contest for the same pool of capital.
