FPIs bow to IPO allure, but walk out of secondary markets
initial public offerings (IPO) continued to lure foreign portfolio investors (FPIs) in 2024 as they were net sellers of Indian equities in the secondary market amid rich valuations, sluggish demand and slowing GDP growth.
Given the sustained flow of companies filing draft red herring prospectus (DRHPs) with the markets regulator as a part of the IPO launch process, the domestic primary market is likely to remain a major route of equity investment for foreign investors in 2025 as well.
In 2024, FPIs pumped ₹1.22 lakh crore ($14.5 billion) into the primary market, the most they've invested in IPOs and qualified institutional placements (QIPs), according to NSDL data. This more than offset their exit from the secondary market to the tune of ₹1.21 lakh crore ($14.37 billion), resulting in a net inflow of ₹426.9 crore ($124 million) for the calendar year.
This compares with the net total investment of ₹1.71 lakh crore ($20.74 billion) by FPIs in the previous year, the highest annual investment in domestic equities till date.
IPOs provide an efficient route for investment in new businesses as they are often launched at attractive valuations compared with listed peers.
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