Whalesbook
**### The Liquidity Chase: Secondary Market Strength
January 2026 witnessed robust activity in India's secondary markets. Equity cash market turnover surged to ₹23.9 lakh crore, marking a 16-month high. Average daily turnover (ADT) also climbed to ₹1.2 lakh crore, representing a 27% month-on-month and 24% year-on-year increase. This expansion was primarily propelled by mainboard equities. Notably, exchange-traded funds (ETFs) experienced a dramatic 174% sequential jump, with cumulative growth reaching 699% since January 2025, and sovereign gold bonds rose by 95% month-on-month. This surge in demand for ETFs and gold indicates a growing investor preference for tangible or highly liquid assets amidst global economic uncertainties and domestic price fluctuations. Gold prices fluctuated between ₹63,000 and ₹65,000 per 10 grams for 24K gold, reflecting steady investment demand driven by its safe-haven status and a 14% price increase during the month.
Derivatives segments also posted gains. Equity futures ADT rose 29% month-on-month to a 15-month high, driven by single-stock futures. Equity options ADT increased by 35% month-on-month, with Nifty50 options dominating index options turnover. Commodity derivatives saw futures turnover up 17% and options premium turnover up 46%. In contrast, activity in NSE Emerge equities declined 19% month-on-month, while InvITs and REITs saw significant drops of 50% and 49%, respectively.
Primary Market Headwinds
Despite the secondary market's vigor, primary market fundraising moderated sharply. Total fundraising in January 2026 fell to ₹1.1 lakh crore, the lowest level in 21 months. Equity issuances declined 45% month-on-month, and debt issuances dropped 53%, signaling a broad-based slowdown amid softer market conditions. Eight companies listed via IPOs, with three mainboard issues collectively raising ₹4,765 crore, a significant 78% decrease month-on-month. Of these mainboard IPOs, four debuted at a premium, while four listed below their issue price, highlighting a mixed investor response to new offerings. This cautious sentiment in the primary market contrasts with projections of $25 billion in IPO fundraising for the full year 2026.
The Underlying Economic and Investor Context
The divergence in market activity reflects a broader economic backdrop. India's consumer price index (CPI) inflation rose to 2.75% in January 2026, returning to the Reserve Bank of India's (RBI) tolerance band of 2%-4%, while wholesale price inflation (WPI) stood at 1.81%. The RBI maintained its key repo rate at 5.25%, signaling a steady monetary policy stance amid expectations of continued growth and controlled inflation. India's economy is projected to grow at 7.4% for FY26. Despite these positive macro indicators, investor sentiment appears cautious, particularly concerning new listings. Foreign institutional investors (FIIs) were net sellers in January 2026, though domestic institutional investors (DIIs) absorbed supply, reinforcing India's domestic shield. The Nifty 50 is trading at approximately 20.5 times its one-year forward earnings, a valuation that has normalized towards long-term averages. India's total market capitalization stood at $5,001.331 billion in January 2026.
The Bear Case:IPO Valuations and Long-Term Returns
While January 2026 saw a slowdown in primary market fundraising, the performance of recent IPOs raises concerns about sustained long-term value. Average listing gains have moderated significantly, falling to 9% in 2025 from 30% in 2024, with over half of the IPOs launched in 2025 trading below their issue price. Historically, many IPOs that offer strong initial gains tend to underperform in the long run. The aggressive pricing and high valuations of some recent IPOs, coupled with a general market correction and the absence of broad positive triggers, contributed to the subdued start to 2026 for new listings. Investors are increasingly prioritizing liquidity and safety, as evidenced by the substantial inflows into gold ETFs and other established assets, rather than chasing potentially overvalued new ventures. The mixed performance of recent IPO debuts underscores the importance of rigorous fundamental analysis and a discerning approach to primary market investments, suggesting that initial hype may not always translate into enduring shareholder value.