Foreign portfolio investors (FPIs) have maintained their investment interest in India’s primary market despite remaining net sellers in the secondary market for the majority of the current fiscal year. The secondary market (or stock market) is where securities are traded between buyers and sellers through an exchange, as opposed to the primary market (or stock market), which allows investors to buy securities directly from companies through initial public offers (IPO), follow on public offers, bonus issues, rights issues, and Offers for Sale.
Data from depositories show that, so far this fiscal year, foreign investors had withdrew up to 40,200 crore from the secondary market. They invested 22,906 crore in the primary market, on the other hand, during the same time period, limiting the total net outflow from the equity markets to 17,294 crore.
An abundance of IPOs that occurred in 2022, according to Kranthi Bathini, Equity Strategist at Wealth Mills Securities, was what sparked FPI interest in primary markets. In 2022, 40 Indian corporations raised a total of 59,412 crore through main-board IPOs, including India’s highest public issue, the Life Insurance Corporation’s $21,000 crore offering, and Delhivery’s $5,235 crore offering. 34 of these initial public offerings, totaling $51,478 crore, were listed between April and December.
According to Prime Database, eligible institutional purchasers (including anchor investors) together purchased for 57% of the entire amount of the public offering. FPIs collectively purchased 21% of the issue amount as anchors and QIBs. Although less than in past years, FPI inflows into the primary market during the current fiscal year. FPIs made a record-breaking withdrawal from stock exchanges in FY22 of 2.12 lakh crore while making an investment of 71, 523 crore in the main market. They made investments in the secondary and primary markets totaling 2.09 lakh crore and 64,556 crore, respectively, in FY21.
Given the continuous instability in the secondary market and the massive backlog of IPOs scheduled to hit the capital market in 2023, industry analysts forecast that FPI interest will stay high in the primary market.
The IPO pipeline for 2023 is still strong, according to Pranav Haldea, MD of PRIME Database Group, with 54 companies proposing to raise $84,000 crore already having received SEBI permission. 33 additional companies are awaiting market regulator permission in order to raise $57,000 crore. He did, however, caution that it might take some time before the market sees persistent interest from FPIs before seeing large-scale IPOs.
