Foreign investors unfazed amid IPO wave

Foreign institutional investors (FII), who have been net sellers in India, have cut back on primary market investments, turning selective about initial public offering (IPOs) amid a wave of new share offerings.

- Srushti Vaidya

The lower FII flows into India’s primary markets, according to experts, are a result of high valuations for IPOs, which leaves limited room for investors to make substantial gains.

The primary market is where investors buy newly issued securities such as IPO shares directly from the issuer, while turning to the secondary market to buy and sell existing securities.

Feeble Fll investment in the primary market not only signals low confidence in India’s equity markets but also doesn’t help offset their heavy selling in the secondary market.

Since 27 September 2024, when the Nifty 50 and Sensex hit lifetime highs, Flls have sold shares worth ₹3.5 trillion in India’s secondary market, while buying about ₹98,800 crore via the primary market, per data from the National Securities Depository Ltd.

In effect, over the past year, Flls ploughed back only about 28% of their secondary market selloffs in India into primary market investments.