ET Intelligence Group: Navigating the FPI Landscape Amid Market Volatility
Foreign Portfolio Investors (FPIs) have historically played a pivotal role in shaping the dynamics of the Indian primary market. However, recent trends indicate a cautious approach as FPIs navigate the complexities of high market volatility and a slower pace of initial public offerings (IPOs). This article delves into the current state of FPIs in the Indian market, highlighting their investment patterns, market sentiments, and the implications for future fundraising.
A Shift in Investment Patterns
As of May 2025, FPIs have invested just over $1.8 billion (approximately ₹15,864 crore) in IPOs, a significant decline compared to the $4 billion (around ₹33,487 crore) invested during the same period in 2024. This stark contrast underscores a shift in investor sentiment, as FPIs tread cautiously amid uncertainties in both domestic and international markets.
In 2024, FPIs made a remarkable entry into the Indian market, pumping a record $14.5 billion (about ₹1.2 lakh crore) into primary equity through IPOs and Qualified Institutional Placements (QIPs). A total of 178 companies capitalized on this bullish sentiment, marking it as an all-time high for primary fundraising. However, the landscape has changed in 2025, with only 15 companies launching IPOs so far, nearly half of the 29 that entered the primary market in the previous year.
The Current IPO Landscape
Despite the reduced number of IPOs, the aggregate amount raised in 2025 stands at ₹27,467 crore, nearly on par with the ₹27,651 crore raised in the first five months of 2024. This indicates that while the number of IPOs has decreased, the average size of these offerings has nearly doubled, reflecting a trend towards larger, more substantial fundraising efforts.
Arka Mookerjee, a partner at JSA Advocates & Solicitors, notes that FPIs have adopted a selective approach in the primary market. The risk-off sentiment that emerged between October 2024 and March 2025, driven by various uncertainties, has influenced FPIs to be more discerning in their investment choices. However, there has been a recent uptick in FPI activity, particularly in unique new-age tech companies, where valuations have become more attractive due to stability in the secondary market.
A Bullish Outlook for the Secondary Market
In stark contrast to the subdued IPO market, FPIs exhibited heightened interest in the secondary market in May 2025, with net investments reaching $2.1 billion—the highest in eight months. This resurgence can be attributed to a broader trend among foreign investors favoring emerging markets, excluding China, which saw the largest net inflow since December 2023, totaling $13 billion.
India, along with Taiwan and Brazil, has reported a robust rebound in investor interest. The secondary market’s buoyancy has been further supported by significant bulk and block deals, including stake sales in prominent companies like ITC and InterGlobe Aviation, which have encouraged FPI buying.
Domestic Funds Join the Bullish Trend
Domestic funds have mirrored the bullish sentiment of their foreign counterparts, investing a net ₹49,108 crore in Indian equities in May, a substantial increase from ₹18,063 crore in the previous month. This collaborative optimism between domestic and foreign investors signals a potential recovery in the Indian equity market.
Despite the revival in FPI flows during April and May, their net position in Indian equities remains negative for the first five months of 2025. This is largely due to heavy selling earlier in the year, with FPIs net sellers to the tune of $10.6 billion (approximately ₹92,490 crore).
Conclusion
The landscape for Foreign Portfolio Investors in India is marked by caution and selectivity as they navigate the complexities of market volatility and changing economic conditions. While the primary market has seen a slowdown in IPO activity, the secondary market has emerged as a beacon of opportunity, attracting renewed interest from both foreign and domestic investors. As FPIs continue to adapt their strategies in response to market dynamics, the future of fundraising in India remains a topic of keen interest for stakeholders across the financial spectrum.
In this evolving scenario, staying informed and agile will be crucial for investors looking to capitalize on the opportunities that lie ahead in the Indian market.