July a record IPO month – will it suck liquidity out of the markets?

As the primary markets gets active there is always a fear of liquidity drying up in the secondary market.

July is going to be a busy month for investors, brokers and investment bankers alike as record amount of money is being raised in this month. As much as Rs 24,000 is expected to be raised in July alone and that is a two decade high for any single month.

In previous instances we have Nov 2017 raise Rs 18,824 cr, Oct 2010 raise Rs17,673 cr, Sep 2017 raise 668 cr, Oct 17 raise Rs 16,246  cr and March 2018 raise Rs 15032 cr. 

As the primary markets gets active there is always a fear of liquidity drying up in the secondary market. There are certain theories that make rounds such as, when the IPOs get hotter and more and more companies hit markets – it could be a signal that markets are peaking.

However, if we look at the market performance, after all of the above five instances highlighted, markets on at least 3 occasions out of 5 have inched up in 6 months. 

Market’s direction may depend on various factors, a vibrant IPO market will only bring more investors to the market and create more wealth creating opportunities. As of now liquidity may not be a problem for the markets. Stretched valuations could be a problem. Zomoto will be the biggest IPO in July and investors will be keenly watching the IPO seasons which promises to be a action packed one.

The IPOs in 2021 so far have been doing very well with some of the IPOs , post listing turning out to be multi-baggers , such as Stove Kraft, Ease My Trip and Barbeque Nation.