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Tata Capital, LG IPOs to Drain Liquidity from Secondary Markets

India’s IPO market is heating up like never before, with Tata Capital and LG Electronics India leading the charge. But experts warn that this IPO frenzy might drain liquidity from the secondary market, leaving midcaps and smallcaps gasping for support.
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Tata Capital and LG Issues May Tighten Market Liquidity

pital’s Rs.15,511 crore IPO and LG Electronics India’s Rs.11,607 crore offer-for-sale (OFS). Together, these two giants will account for nearly 90% of this week’s IPO proceeds.

Also Read: Tata Capital's IPO is creating a buzz before opening

Liquidity Under Pressure

Market analysts believe the scale of these IPOs could strain liquidity in secondary markets. Although equities have seen gains for two consecutive sessions, experts expect the rally to pause. “Midcaps and smallcaps might witness a slowdown due to liquidity crunch,” said Pankaj Tibrewal, Founder of Ikigai Investments.

Institutional Math Explained

Assuming a 50% allocation to qualified institutional buyers (QIBs), Tata Capital and LG’s institutional portion amounts to around Rs.13,559 crore — far higher than the Rs.8,000 crore typically available weekly with mutual funds. On average, all domestic institutions — including mutual funds, banks, insurers, and pension funds — deploy around Rs.33,000 crore weekly. These two IPOs alone are expected to absorb a major portion of that liquidity.

Foreign Investors’ Limited Role

Foreign institutional investors (FIIs) are unlikely to ease the pressure. While they’ve injected over Rs.40,000 crore into IPOs, they have simultaneously withdrawn nearly Rs.2 lakh crore from secondary markets this year. This imbalance further tightens liquidity conditions.

More IPOs Flooding In

Apart from Tata Capital and LG, this week’s IPO rush includes Rubicon Research’s Rs.1,377 crore IPO (opening October 9), alongside upcoming issues from Canara Robeco AMC and Canara HSBC Life Insurance, each estimated between Rs.3,000–5,000 crore. WeWork India’s Rs.3,000 crore issue is also in progress, though with moderate subscription so far. Several SME IPOs are lined up as well, adding to the flurry.

Retail Sentiment at Play

Experts note that large IPOs tend to attract retail investors away from listed equities. “Big-ticket IPOs generate excitement and draw retail money, leaving less liquidity for secondary markets,” said Umesh Agrawal of 360 One WAM. Viral Shah of Nuvama Wealth added that such IPO rushes often put temporary pressure on the broader market.

Market Outlook: Mild But Manageable

Despite concerns, analysts don’t expect a steep correction. “Liquidity rotation is happening in a measured way,” said Agrawal. Certain sectors may cushion the impact — with corrections in banks and IT creating value opportunities, while festive demand and GST cuts are keeping consumer electronics buoyant.

Short-Term Impact Likely

The near-term outlook suggests muted movement in secondary markets as funds shift toward IPOs. As Tibrewal summed it up, “Money supply drives the secondary market. When liquidity chases IPOs, listed equities momentarily lose steam.”

Also Read: Tata Capital Raises Rs.4,641 Crore from Anchor Investors Ahead of IPO

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