The Curious Case of India’s (Booming) Primary Market and (Bleeding) Secondary Market
[Tejas is a capital markers lawyer at a leading law firm in India. He is also a Senior-Editor at IRCCL. The views expressed by him in this post are personal and not those of the law firm he is associated with. The post does not constitute his professional advice on the subject.]
Indian companies have raised a record INR 94,205 crores through 78 mainboard initial public offerings (IPOs) in the first quarter of fiscal year 2027. Average listing day gains have also risen from 7% to 19% compared to the same period in Fiscal Year 2026. September 2026 has alone seen 30 mainboard IPOs raising INR 38,785 crores, the most in a month since December 1996. Interestingly, even the Indian economy is still projected to grow at over 7% despite the erosion in shareholder wealth and the rapid correction in the secondary market, discussed below.
An Overdue Correction in India’s Secondary Market
On the other hand, NIFTY and SENSEX have logged over 8 straight weeks of losses (barring a slight correction in the first week of October 2026), making it one of the longest negative streaks in almost 25 years. Outflow of money from foreign institutional investors have hit a record USD 27.8 billion in 2026, with crude near USD 100 per barrel, and the global bond yield rates - lead by the USA, surging to unprecedented levels. The INR has been depreciating, with NIFTY down approximately 13% in 2026, making India the second worst performing major market globally. Valuations of companies had become stretched post the COVID-19 pandemic, so the correction is not surprising. What is interesting is that the primary market in India, still continues to hold up, while the broader market is tumbling. Below are a few possible reasons to explain this divergence.
Massive foreign outflow of money
In 2026 so far, FII outflows from the secondary market stand at approximately INR 2,84,208 crores, while inflows into the primary market total approximately INR 47,153 crores. This shift does not necessarily mean that FIIs have turned bullish. Rather, it suggests that FIIs have become more selective - selling existing positions while still participating in primary offerings.
Domestic institutional money (DII) and retail institutional money are playing the role of a ‘shock absorber’
There is no denying that retail investors have a lot more liquid disposable income now. SIPs have hit a record INR 32,297 crores in August 2026. DII ownership is at a record high while FII ownership is at a 14-year low. What this means is that retail investors are now investing more money than ever into systemic funds and IPOs which does tie up a lot of their money that could have been allocated towards individual stocks in the secondary market.
Shift in investor appetite
Foreign brokerages have cut India in terms of its valuations, earnings, risks and dilution concerns. A falling INR has not helped as well. Despite all these reasons, an investor does not necessarily need to be bullish on the broader market to participate in primary offerings. A particular company can still appear attractive from in terms of availing ‘listing gains’ while the broader market remains bearish.
Offer for sale (OFS) and exits to investors
Even the IPOs that have taken place, have majorly been through the OFS route, which has accounted for 61% of mainboard IPOs. The recent IPO of the National Stock Exchange, amounting to INR 22,561 crores IPO (second largest in India at the time of writing) was a pure OFS public offering. Consequently, large volume of money has (i) simply changed hands, or (ii) created a net drain in volumes in the market, with little to no money being raised for capital expenditure or long-term growth of the capital markets.
Excess supply due to the West-Asia conflict
Further, the Securities Exchange Board of India (SEBI) granted a one-time extension in April 2026 to companies whose approval to undertake an IPO was expiring. This meant that various companies deferred their plans to access the primary market amid the West-Asia geopolitical conflict but have since resorted to the primary markets post July 2026 in a bid to cumulatively raise around INR 45,000 crores. Therefore, this has created an oversupply of stocks in the market further leading to the correction in the primary market as discussed above.
Expiring regulatory deadlines
The SEBI issued ‘approval’ for 35 of 161 companies to undertake an IPO expired on 30 September 2026. Additionally, the fiscal 2026 audited financial statements of various companies also expired on the same date. This meant that various companies proposing to raise money rushed to launch their IPOs in order to avoid updating their financial numbers or refiling their offer documentation - given how expensive and time-consuming this process can be. The combined effect of expiring approvals and financial statements created a supply surge in the primary market that has little to do with the bearish market conditions.
Author's Takeaway
Strong listings in recent times have lifted issuer confidence - which has resulted in a ‘positive feedback loop’ with more company’s reaching to the primary markets and consequently stronger investor participation. What must be noted is that a ‘booming’ primary market is not the same as a healthy market. Further, not every listing has delivered positive gains to investors, and many companies have listed at a discount or are trading below their offer price (see diagram below). With over 140 companies in the pipeline to access the primary market in the near future, it will be interesting to see how long this plays on for, and when listing (and post listing) performance can hold up with the current market conditions.
Source: NSE, BSE and post (figures may change at the time of reading this post)