Foreign portfolio investors (FPIs) have demonstrated a clear and sustained faith in India's long-term growth story, channeling massive investments through initial public offerings (IPOs) even as they pull money from the cash market. An analysis of the period from 2015 to the end of 2025 reveals a compelling trend: while FPIs were net sellers in the cash market in six of those eleven years, their overwhelming participation in the primary market has made them net buyers of Indian equities to the tune of ₹2.44 trillion over the past decade.
The Primary Market Magnet: Offsetting Cash Outflows
The year 2025 exemplifies this dual strategy. FPIs executed a record net sale of ₹2.34 trillion in the cash or secondary market. This move was driven by India's equities becoming the worst-performing among emerging markets, with the MSCI India Index delivering a mere 4.8% return through November, significantly trailing China (33%) and South Korea (78%). However, simultaneously, FPIs funneled ₹73,749 crore into the primary market, marking the second-highest annual inflow after the record ₹80,314 crore in 2021.
This pattern holds true for the broader 11-year window. Cumulative net sales by FPIs in the cash market totaled ₹2.91 trillion. Yet, these outflows were more than offset by cumulative primary market purchases worth a staggering ₹5.35 trillion, resulting in the overall net buying position.
Valuations and Conviction: The Driving Forces
Investment bankers attribute the cash market sell-off to tactical decisions influenced by high valuations and an earnings slowdown. The Nifty 50, trading at around 18 times FY28 earnings, saw a sequential net profit decline of 8.1% in the September quarter of FY26. This made Indian stocks appear expensive relative to other emerging markets, prompting profit-booking.
However, the primary market offers a different proposition. "Secondary market selling should not be mistaken for loss of confidence, as FPIs are still voting for India through the primary market," said Raghav Gupta, Joint Chief Executive of IIFL Capital. He explained that IPOs allow FPIs to access India's structural growth at cleaner entry points and better valuations, aligning with longer-term conviction.
Vikas Khattar, Managing Director and Co-head of Investment Banking at Ambit Group, calls it "a game of rebalancing." He notes that IPOs provide a pricing benefit and the opportunity to build large positions in new companies, which is why FPI participation spikes in years with large offerings.
Record Fundraising and Key Participants
The data supports this analysis. The calendar year 2025, through 30 December, witnessed a record fundraising of ₹1.76 trillion by 103 companies via IPOs, according to PrimeDatabase. This vibrant primary market attracted major global institutions.
Key FPI anchors in Tata Capital's ₹15,511.87 crore issuance—the year's largest—included Morgan Stanley, Goldman Sachs, and Nomura. Similarly, the IPO of LG Electronics India, which raised ₹11,607.01 crore, saw participation from giants like BlackRock and sovereign wealth funds from Singapore, Norway, and the UAE.
Outlook: Bullishness on Structural Themes
The trend is expected to persist. Experts believe FPI interest in India's primary markets will continue to grow in the coming year, particularly in themes like manufacturing, financialization, and domestic consumption. Ashish Gupta, Chief Investment Officer of Axis Mutual Fund, points out that listings of companies in new business lines and those with more attractive valuations than existing peers will sustain this interest.
While softer US interest rates and stronger returns in other markets may continue to drive tactical reallocations from the secondary market, India's primary market remains a cornerstone for foreign investors building long-term, strategic positions in the country's economic future.
