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 A healthy pick-up in the IPO (initial public offering) segment in late 2021 has hammered the country's key secondary market indices, experts said.

The slide in the secondary market has been purely and squarely attributed to the diversion of liquidity to the primary markets for IPOs.

Lately, mega IPOs of brands such as Nykaa, Zomato, PolicyBazaar and that of Paytm have attracted huge investments from secondary to primary markets.

In market parlance, the primary market is where securities are created. They are traded in the secondary market.

"We are seeing correction in the Indian market and some people believe that the correction could be because of the liquidity sucked by the primary market, as the IPO market is so hot for the last one month with large IPOs and record subscriptions. However, the main reason for correction in our market is relentless selling by FIIs," said Parth Nyati, Founder, Tradingo.

"The major impact of the busy primary market can be seen in the broader market, because we are seeing consolidation and correction in many midcap and smallcap counters while there was a strong rally in October in these pockets," Nyati added.

As per the data furnished by Tradingo, funds worth Rs 2.35 lakh crore of HNIs (high networth individuals) or non-institutional investors were engaged in the primary market since the IPO of Nykaa.

Significantly, HNIs' funds are a key driver for a rally in the broader market.

"Liquidity pulled out by IPOs is for a small period. As long as investors are making money on listing, they will bring liquidity from different sources. The impact of liquidity tied-up in IPOs is limited on the secondary market flows," said Deepak Jasani, Head of Retail Research, HDFC Securities.

According to Likhita Chepa, Senior Research Analyst, CapitalVia Global Research: "If we talk about the influence of the primary market on the secondary market, the latter's liquidity depends on the success of public offerings.

"The news flows (mainly negative) and cost of raising funds measure the liquidity of securities in the secondary market."

Anuj Gupta, Vice President at IIFL Securities, said: "The depository data for this month shows that net FPI buying was to the tune of over Rs 14,000 crore in equities (until November 18). The net buy figure, however, is inclusive of the large primary market investment of Rs 23,169 crore during this period. So, FPIs have actually offloaded stocks worth over Rs 9,000 crore in the secondary market in November."