The strong demand for the ₹30,000 crore Jio Platforms IPO has prompted discussions among experts on the relationship between primary market activity and secondary market liquidity, even as small- and mid-cap stocks remain under selling pressure.
The Jio Platforms IPO issue received cumulative bids worth ₹3.75 lakh crore by the second day, drawing interest from investors across categories.
Gurmeet Chadha, Managing Partner and CIO at Complete Circle, said the IPO could draw around ₹1.5 lakh crore to ₹2 lakh crore in liquidity in the near term. He also pointed to lower exposure of some large mutual funds to small- and midcap stocks as another factor behind recent weakenss in these segments.
Chadha added, “What we are seeing is a lot of capitulation in small and midcaps, in particular. Yesterday and even early morning today, a lot of companies with even good numbers fell 10-12% … some of the stocks are falling on very low volumes.”
Chadha said investor sentiment has been weak in the small- and mid-cap segments, where gains accummulated over several months can be reversed over a few trading sessions. He expects liquidity conditions to improve after the IPO listing and said an easing of geopolitical tensions could provide support to market sentiment.
He also sees attractive risk-reward opportunities emerging in several stocks amid the correction.
Offering a different perspective, Pranav Haldea, Managing Director at Prime Database, said primary issuances do not necessarily divert funds from secondary markets. Calling the Jio Platforms issue a “landmark moment for the capital market,” Haldea maintained that ample liquidity exists for attractively valued, high-quality paper.
“We looked at the 10 largest IPOs in India’s history and looked at 30 trading sessions around it, and we didn’t see any kind of massive index movement around those IPOs,” Haldea said.
The primary market’s resilience comes alongside a stark divergence in foreign institutional investor flows. While FIIs have pulled $33 billion from the secondary market this year, they have injected $6 billion into IPOs.
Haldea pointed out that while dependence on foreign investors has declined—allowing smaller IPOs to succeed solely on domestic support—FIIs continue to selectively back marquee names. “It’s ironic that it’s actually for the first time that you’re seeing some bit of divergence also taking place between primary and secondary markets,” he said.
Chadha also noted that foreign investors have expanded their exposure beyond the largest listed companies, with interest in themes such as defence, electrification and chemicals. However, he said the broader market could benefit from an improvement in sentiment, as strong earnings have not consistently translated into share price gains.
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