In a striking shift in capital flows, the FII investment in IPOs in India has dropped by approximately 55% in 2025 compared with 2024. Foreign institutional investors (FIIs) are showing greater caution as high valuations, weak earnings momentum and global uncertainty weigh on primary-market activity.
The Numbers At A Glance
- According to data from the National Securities Depository Limited (NSDL), FIIs invested around ₹54,277 crore in IPOs launched in 2025, which raised about ₹1.21 lakh crore in total.
- In 2024, FII investment in IPOs stood at about ₹1.22 lakh crore.
- This reflects a rough 55% year-on-year decline in FII participation in the primary market.
- In the first five months of 2025, FIIs invested just over US$1.8 billion (≈ ₹15,864 crore) in IPOs, compared with US$4 billion (≈ ₹33,487 crore) in the same period last year.
Why Are FIIs Pulling Back?
Several factors are combining to make FIIs more selective or hesitant when it comes to IPOs:
1. Elevated valuations
Analysts point out that many IPOs are coming to market at valuations that leave little room for upside, especially for overseas investors who factor currency risk, allocation mechanics and exit horizons.
One estimate notes India’s forward P/E multiple (~22.7×) is meaningfully higher than many regional peers — making fresh equity investment less compelling.
2. Secondary market weakness and rotation
FIIs have been consistent sellers in the secondary market in 2025, withdrawing substantial sums from Indian equities.
With domestic companies selling and global equity landscapes shifting, FIIs are reallocating capital rather than flooding new IPOs.
3. Global uncertainty and alternative opportunities
Rising bond yields globally, geopolitical risks, and stronger investment flows into other markets are making India less of a “go-to” for marginal FII allocations.
With IPOs increasingly large, FIIs are more cautious about timing and listing gains.
4. Changing nature of IPOs and investor allocations
While the number of IPOs is rising, the average size has increased, and the share of anchor book participation by domestic institutions is growing.
This dynamic means FIIs must be more selective, as their opportunity set is narrower.
Implications for the IPO Ecosystem
The sharp drop in FII participation has several implications:
- Pricing discipline may tighten: With fewer overseas “big-ticket” anchor investors, issuers may need to be more realistic in valuations and listing expectations to draw interest.
- Greater reliance on domestic investors: Domestic mutual funds, insurance companies and retail investors may have to fill the gap that FIIs are leaving in the primary market.
- Potential slowdown in IPO launches: If issuers sense weak investor appetite or poor listing returns, some may postpone or downsize their offering.
- Signal of sentiment: The primary market often reflects investor sentiment about growth, risk-reward and macro outlook. A big pull-back by FIIs signals caution — not necessarily for the long term, but for the current phase.
What to Watch Going Forward
- Upcoming large IPOs: How much anchor participation and FII commitment they attract will be a key barometer.
- Listing performance: If new IPOs deliver weak debuts, investor appetite (especially from FIIs) may remain constrained.
- Global flows and macro: FII interest will be sensitive to global interest rates, emerging-market risk premia and India’s earnings trajectory.
- Regulatory & structural changes: Policy moves that make it easier or more attractive for FIIs to invest in the primary market could tilt the balance.
Final Word
In summary, FII investment in IPOs has plunged by around 55% this year, underscoring a more cautious stance among global investors towards India’s primary market. While this does not mean the end of IPOs or the growth story, it does signal that issuers, underwriters and domestic investors must adapt to a market where foreign “easy money” is no longer guaranteed. Valuations, listing gains and clarity of growth story will matter more than ever.In a striking shift in capital flows, the FII investment in IPOs in India has dropped by approximately 55% in 2025 compared with 2024. Foreign institutional investors (FIIs) are showing greater caution as high valuations, weak earnings momentum and global uncertainty weigh on primary-market activity.
The Numbers At A Glance
- According to data from the National Securities Depository Limited (NSDL), FIIs invested around ₹54,277 crore in IPOs launched in 2025, which raised about ₹1.21 lakh crore in total.
- In 2024, FII investment in IPOs stood at about ₹1.22 lakh crore
- This reflects a rough 55% year-on-year decline in FII participation in the primary market.
- In the first five months of 2025, FIIs invested just over US$1.8 billion (≈ ₹15,864 crore) in IPOs, compared with US$4 billion (≈ ₹33,487 crore) in the same period last year.
Why Are FIIs Pulling Back?
Several factors are combining to make FIIs more selective or hesitant when it comes to IPOs:
1. Elevated valuations
Analysts point out that many IPOs are coming to market at valuations that leave little room for upside, especially for overseas investors who factor currency risk, allocation mechanics and exit horizons.
One estimate notes India’s forward P/E multiple (~22.7×) is meaningfully higher than many regional peers — making fresh equity investment less compelling.
2. Secondary market weakness and rotation
FIIs have been consistent sellers in the secondary market in 2025, withdrawing substantial sums from Indian equities.
With domestic companies selling and global equity landscapes shifting, FIIs are reallocating capital rather than flooding new IPOs.
3. Global uncertainty and alternative opportunities
Rising bond yields globally, geopolitical risks, and stronger investment flows into other markets are making India less of a “go-to” for marginal FII allocations.
With IPOs increasingly large, FIIs are more cautious about timing and listing gains.
4. Changing nature of IPOs and investor allocations
While the number of IPOs is rising, the average size has increased, and the share of anchor book participation by domestic institutions is growing.
This dynamic means FIIs must be more selective, as their opportunity set is narrower.
Implications for the IPO Ecosystem
The sharp drop in FII participation has several implications:
- Pricing discipline may tighten: With fewer overseas “big-ticket” anchor investors, issuers may need to be more realistic in valuations and listing expectations to draw interest.
- Greater reliance on domestic investors: Domestic mutual funds, insurance companies and retail investors may have to fill the gap that FIIs are leaving in the primary market. The Economic Times
- Potential slowdown in IPO launches: If issuers sense weak investor appetite or poor listing returns, some may postpone or downsize their offering.
- Signal of sentiment: The primary market often reflects investor sentiment about growth, risk-reward and macro outlook. A big pull-back by FIIs signals caution — not necessarily for the long term, but for the current phase.
What to Watch Going Forward
- Upcoming large IPOs: How much anchor participation and FII commitment they attract will be a key barometer.
- Listing performance: If new IPOs deliver weak debuts, investor appetite (especially from FIIs) may remain constrained.
- Global flows and macro: FII interest will be sensitive to global interest rates, emerging-market risk premia and India’s earnings trajectory.
- Regulatory & structural changes: Policy moves that make it easier or more attractive for FIIs to invest in the primary market could tilt the balance.
Final Word
In summary, FII investment in IPOs has plunged by around 55% this year, underscoring a more cautious stance among global investors towards India’s primary market. While this does not mean the end of IPOs or the growth story, it does signal that issuers, underwriters and domestic investors must adapt to a market where foreign “easy money” is no longer guaranteed. Valuations, listing gains and clarity of growth story will matter more than ever.
