Will the primary market revival suck out secondary market liquidity?

The volatility in the secondary market had brought the activity in the primary market to a near standstill over the past few months. 

Corporates, analysts said, were waiting for stability to return before they tapped the markets for funds.

According to capital market data provider Prime Database, 14 Indian corporates raised Rs 35,456 crore through main board initial public offerings (IPOs) in the first half of fiscal 2022-23. 

The amount raised, it said, was 32 per cent lower than the Rs 51,979 crore raised through 25 IPOs in the corresponding period of FY22. 

Among the ones that did tap the markets, Rs 20,557 crore , or 58 per cent, of the amount was via the IPO of LIC, according to Pranav Haldea, Managing Director, PRIME Database Group.

However, a turnaround in the primary market activity may not be too far away.

According to investment bankers, nearly 10 firms are planning to tap the markets for funds in the next 4-6 weeks. 

The companies that wish to tap the primary market include Five-Star Business Finance, Pristine Logistics, Landmark Cars, Senco Gold, DCX Systems, Kaynes Technology, Tracxn Technologies and Uniparts India. 

Of these, the IPO of Tracxn Technologies was subscribed two times. The Rs 309 crore IPO received bids for 4.27 crore shares. According to NSE data, 2.12 crore shares was on offer.

So, will the revival in the primary market activity suck out liquidity from the secondary markets?

Satish Ramanathan, CIO - Equity at JM Financial believes that the markets have adequate liquidity to absorb the same. 

The key factor, he said, is on the quality and valuation of the issue(s).  

Speaking to Business Standard, Ramanathan says, investors should remain positive on the markets. IPO pipeline will not disturb the market sentiment and investors will subscribe only to quality issues. 

Ambareesh Baliga, an independent market analyst, too, believes that good businesses at attractive valuations will always find buyers.

Ambareesh Baliga, Independent Market Analyst says, primary market will continue to do well. Companies with weak fundamentals, high issue price will find less takers. Line up of Rs 12,000 crore is not too large for the secondary markets to absorb. Pricing of issues remains key

On Thursday, the markets will track Q2 results of 37 companies including SBI Card, PNB Housing Finance and Tata Chemicals.