Foreign equity inflows into the primary market have hit a historic high as portfolio investors shied away from the overvalued secondary market to focus on the domestic primary market that is being flooded with a record number of public issues.
According to latest depositories data, foreign portfolio investors (FPIs) inflows in the primary market stood at ₹66,541 crore from April to date. The inflows, just nine months into the current fiscal, have already crossed the previous high of ₹64,556 crore in FY21. FPIs pumped in ₹49,464 crore in FY20.
Market experts attribute the record number of initial public offerings (IPOs) that flooded the Indian market in the current fiscal for FPIs heightened interest in the primary market.
New age cos tap market
“The Indian market has witnessed several new age technology-led IPOs including Zomato, Nykaa and Paytm to name a few. There has been a humongous buying interest from FPIs across the globe as anchor investors and given the success of most of the IPOs in recent past there have been exuberance among FPIs on IPOs,” said Kranthi Bathini, director of equity strategy at WealthMills Securities.
“As most of the reputed foreign funds were invested in these IPOs before listing, that gave more comfort for the FPIs to participate in these IPOs,” he added.
According to India Ratings and Research, the IPOs in the current fiscal have reached a significant level after FY18 in terms of issue size, with still four months left in the financial year.
“During April to November 2021, the number of IPO counts for FY22 stood at 71, amounting to ₹85,600 crore, compared with ₹27,200 crore raised by 56 companies in FY21,” it noted.
Outflows too strong
Incidentally, the current fiscal also witnessed the highest FPI outflows from the secondary market. According to depositories data, FPIs pulled out ₹84,968 crore between April to till date. Prior to this, the highest outflow from the Indian stock market stood at ₹43,312 crore in FY20 and ₹28,656 crore in FY2016.
“We are seeing a diversified trend in FPI flows when it comes to secondary and primary markets. The reason for inflow into the primary market could be due to their interest in new-age companies that went public this year. At the same time, the valuations in the secondary market are also on the higher side so they are booking profit after a strong market rally in the last two years,” said Ajit Mishra, VP - Research, Religare Broking.
Eyes on LIC IPO
With still four months left in the current fiscal and a slew of public issues including Life Insurance Corporation of India's ₹1-lakh crore IPO, market experts believe that inflows into the primary market will continue to go up further.
“The exuberance and heightened participation from FPIs is going to continue in coming days also as some more companies with interesting business models are going to hit the primary market in India,” WealthMills’ Kranthi said.
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