As the IPO market picks up steam, foreign investors are increasing their focus on India’s primary market. According to the latest data, foreign portfolio investors (FPIs) have pumped in ₹21,350 crore in the primary market from April to August .

The inflows in the first five months of the current fiscal are already about 90 per cent of FPI investment in the primary market in the whole of the previous fiscal. In FY23, FPIs invested ₹24,123 crore in India’s primary market.

The primary market allows investors to buy securities directly from the company. It can be an initial public offering (IPO), follow-on public offers, rights issues, and Offer for Sale.  The secondary market (or stock market) trade securities between buyers and sellers through an exchange. 

Kranthi Bathini, Director - Equity Strategy at WealthMills Securities, attributes the FPI interest in the primary market to the spate of public issues in recent months. 

The Indian IPO market picked steam after a lull in early 2023. Since the beginning of the current fiscal,  as many as 15 companies, including TVS Supply Chain Solutions, Aeroflex Industries, SBFC Finance, and Cyient DLM have made their public market debut. FPIs and domestic institutions like mutual funds were the anchor investors for many of these public issues. In addition, over 20 SME companies also got listed on the bourses in the current fiscal.  

“Although there were no big ticket IPOs till now, FPIs are seeing great investment opportunities in some of these mid-sized company IPOs,” Bathini said. 

FPI investments in the primary market touched an all-time high of ₹71,523 crore in FY22 when Indian companies mopped a record ₹1.11 lakh crore through public issues. 

Secondary market

FPIs have invested ₹1.40-lakh crore in the secondary market in the first five months of the current fiscal. However, the pace of investment has come down from ₹45,737 crore in June to ₹37,293 crore in July and further down to ₹9,233 crore in August.  

“FPIs have been sellers in most emerging markets in August mainly due to this double whammy of rising dollar and rising bond yields. Profit booking in financials also contributed to FPI selling,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.