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Foreign portfolio investors (FPIs) have clearly been caught by the IPO frenzy in India. This is evident from their investment trend in Indian equities over the last eight months.
According to depositories data, FPIs’ net investment in Indian equities between January 1 and August 30 stood at ₹49,402 crore. Of the total inflow, over 74 per cent, or ₹36,577 crore, came through the primary market route as against the ₹12,826 crore invested via stock exchanges. In fact, investments through the primary market exceeded the the secondary market in five out of eight months, including in August.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “FPIs were sellers in Indian equity to the tune of ₹11,308 crore in July. In August, too, they net sold in the cash market. The August figures are positive only if we include FPI investments in the primary market.”
IPO, QIB, rights issue
FPI inflows through the primary market include investments in initial public offering (IPO), qualified institutional buying (QIB) and rights issue. “The primary market has been seeing noticeable traction in the last one year and nearly 38 IPOs got listed on the exchanges. The majority of the companies were from online service, chemical, FMCG and pharma space,” said Ajit Mishra, Vice-President - Research, Religare Broking Ltd.
Prior to the current calendar year, the quantum of FPI investments through the primary market exceeded the secondary market in 2017, which is considered to be a golden year for IPOs in India. In 2018, FPI inflows through the primary market stood at ₹18,761 crore against outflows of ₹51,774 crore from the secondary market.
The year 2021 has already seen 38 mainboard IPOs with companies raising nearly ₹72,000 crore, including highly popular IPOs like Zomato’s ₹9,375-crore issue and PowerGrid InvIT’s ₹7,735-crore issue.
With many more IPOs to hit the market, including the much-anticipated public issue of Life Insurance Corporation, the ₹16,600-crore issue of Paytm, FPI interest is likely to be anchored around the primary market.
Cautious stance
“We feel FPIs are taking a cautious stance due to premium valuations. Going ahead, further unlocking of the economy, the pace of vaccination drive and recovery in the earnings would again prompt their participation in the secondary market, without hurting their inflows in the primary space,” Mishra said.
A recent Bloomberg report also said that China’s crackdown on technology companies is prompting global investors to look for new opportunities across Asia, contributing to a record jump in IPOs from India to South Korea.
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