Why FPIs Are Backing Indian IPOs Amid Market Uncertainty

Quick Summary

• Foreign portfolio investors (FPIs) are increasing their investments in Indian IPOs, wiht a threefold surge to ₹26,508 crore in FY25 compared to the previous year.
• FPIs’ share of total anchor investments rose from 35% in FY23 to 46% in FY25.
• Despite selling about ₹1.3 lakh crore worth of equities in the secondary market, FPIs invested ₹7,142 crore as anchor investors until August this fiscal year.
• Reasons for FPI interest include higher potential returns adn access to differentiated business models at early stages before future prospects are fully priced by the market.
• Domestic institutional investors (DIIs), including mutual funds and insurance companies, also saw a boost in anchor participation, reaching ₹30,709 crore-a two-and-a-half-fold rise compared to last year.
• DIIs dominate total anchor books but their share fell from 65% in FY23 to 53% in FY25.
• The prominence of domestic institutions has reduced smaller IPOs’ dependency on foreign investors.

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Indian Opinion Analysis

The meaningful surge of FPI investments into Indian IPOs reflects global confidence in India’s economic growth story despite geopolitical uncertainties and stretched secondary market valuations. This trend underscores the attractiveness of India’s burgeoning companies offering differentiated business models and early-cycle growth opportunities that perhaps yield high investor returns.

Domestically, increased participation by institutional investors highlights growing local confidence while reducing dependency on foreign funds-especially for smaller IPOs-which bodes well for self-reliance within capital markets. However, sustaining this momentum depends on maintaining macroeconomic stability amid trade tensions and ensuring robust corporate performance post-listing. Balancing foreign and domestic investment flows remains key for promoting equitable growth across India’s financial ecosystem.

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