How FIIs are planning their investments in Indian IPO market and reaping benefits

Mumbai: The Indian stock market is witnessing an interesting trend this year. Foreign institutional investors (FIIs) are selling heavily in the secondary market i.e. buying and selling shares, on the other hand they are investing huge sums of money in IPOs i.e. primary market. Statistics show that FIIs have withdrawn around Rs 2 lakh crore from the secondary market so far this year, but they invested only Rs 55,000 crore in IPOs. Which has become a topic of discussion in the market.

According to a report by ET, experts are calling this trend 'The Great Divergence'. In fact, not all foreign investors are the same. There are some short-term hedge funds that react to global trends, such as the boom of AI in the US or the return of investment in China. These investors are selling in the secondary market to book profits or reduce risk.

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On the other hand, there are long-term investors like sovereign funds, pension funds and global long-term investors, who believe in India's growth story. These people are making initial investments in new sectors through IPOs, where they get an opportunity to take massive stakes.

Interestingly, FIIs are extremely active in India's IPO market despite withdrawing money from the secondary market. So far this year 84 companies have listed, from which Rs 1.3 lakh crore has been raised. These include giant companies like Tata Capital, HDB Financial, JSW Cement, Urban Company, LG Electronics.

Also, by September 2025, the share of FIIs in Indian equities has come down to a 13-year low of 16.7%. That is to say, on the one hand, holding is decreasing and on the other hand new investments are increasing.

Experts say that this strategy shows discipline in valuation. Corporate earnings have been slow in recent quarters and Indian markets have become costlier than other countries. In such a situation, FIIs are withdrawing profits from stocks traded at high valuations and re-investing in IPOs or QIPs at an attractive price. That means they are adopting the strategy of selling expensive and buying cheaply.

Trust in primary market, caution in secondary

Market experts say that FIIs are investing in IPOs because they can invest money directly into companies, which supports growth, expansion and debt reduction. This is a good opportunity for long-term investors. At the same time, in the secondary market, they are still cautious due to global uncertainty and changes in interest rates.