Emergence of Rs 2.5 lakh crore IPOs by 2026 could lead to ‘liquidity drain’, says HDFC Securities; pins Nifty at 28,720

As the Indian stock market heads into 2026, it faces an unusual paradox. On the one hand, optimism is growing around growth, earnings recovery and policy support. On the other hand, a flood of new listings threatens to put pressure on liquidity and test investors’ appetite. According to HDFC Securities, the year ahead could very well be determined by how the markets navigate this delicate balance.The most immediate challenge is the sheer size of the IPO pipeline. More than 190 companies are expected to tap the primary market by 2026, collectively seeking to raise over Rs 2.5 lakh crore. Such a tough issuance calendar raises a fundamental question: Will the IPO rush ultimately kill the goose that laid the golden eggs? HDFC Securities highlights the risk of a “liquidity drain” in the secondary market as capital is diverted to new listings. As investors’ funds are absorbed by new paper, trading activity and price performance of listed shares may come under pressure.

These concerns are compounded by the uncertainty surrounding the flows of foreign investors. Even after meaningful consolidation in 2025, Indian equities continue to trade at a premium to other emerging markets such as China and Brazil. Foreign institutional investors have pulled out nearly Rs 3 lakh crore from Indian equities by 2025. While there is hope that capital flows could stabilize or even reverse by 2026, HDFC Securities warns that several factors could still keep foreign capital on the sidelines.That said, the broader global and domestic backdrop offers reasons for cautious optimism. Global trade uncertainty is expected to gradually decline, aided by easing geopolitical tensions and the prospect of tariff reversals. Trump’s trade policies, which have been a major source of disruption, are expected to further decline as a dominant influence on the global economy. “A rotation of emerging markets is expected, with India as the main beneficiary,” it added.

Within this framework, a rotation of emerging markets is anticipated, with India seen as one of the main beneficiaries. China’s GDP growth is expected to remain stable, while crude oil prices are likely to remain subdued, easing pressure on inflation and external balances. Central bankers’ continued demand for gold is expected to sustain the metal through 2026, reflecting continued caution even as growth stabilizes.

India’s domestic macro story remains a key pillar of HDFC Securities’ prospects. Interest rate cuts, CRR cuts and liquidity injections are part of this supportive policy mix. Structural domestic demand and an increasing allocation of household savings to equities continue to provide a strong internal buffer, potentially reducing dependence on foreign flows.

Improvements in digital infrastructure and the rapid digitalization of payments are also highlighted as structural positive factors, creating new economic opportunities and increasing efficiency across all sectors. Against this backdrop, nominal GDP growth is expected to reach double digits in 2026, paving the way for an earnings recovery after a challenging period. From a market perspective, valuations have corrected significantly and foreign portfolio investor exposure is at historically low levels. Together, these factors create upside potential if sentiment turns. HDFC Securities expects Indian markets to deliver a ‘Goldilocks’ outcome, marked by a broad-based recovery. Industrial metals are expected to flourish, driven by improving global demand, while the rupee is expected to remain stable.

For FY27, Nifty earnings are expected to grow by 16%, which translates into an expected annual return of around 11% for the index, which means an annual Nifty target of 28,720.

(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)