Copyright © HT Digital Streams Limit all rights reserved. India’s deepening of capital markets has enabled the middle -sized and large IPOs with a strong institutional and retail participation, a summary of domestic institutional investors, led by mutual funds, and is now accounting for more than half of the IPO anchorage in India, which collects foreign portfolio. The shift reflects strongly local inflows, markets deepening and reducing the dependence on foreign capital. Mumbai: India’s flowering market for initial public offers is dealing with a decisive shift, with domestic institutional investors such as mutual funds, insurance companies and banks to establish foreign players in the underwriting of new sales sales. Data from the past 24 months show that these are now accounting for at least 50% of subscriptions in the anchor book of an IPO allocations made to choose large investors at a fixed price before opening an offer, which helps the demand and stabilizing the agreement. It is a sharp interruption of the days when foreign portfolio investors were the primary anchors in Indian IPOs. While global uncertainties have urged FPIs, the floor of capital markets in India has enabled the middle size and large IPOs with a strong institutional and retail participation, making new stock offers less susceptible to larger macro economic shifts. FPIs have turned net sellers in India and downloaded shares worth $ 31 billion (£ 2.7 trillion) from October to July, while DI’s bought £ 6.65 shares. When it comes to IPOs greater than £ 1,500 crore, the participation of FIIs and DIIs remains wide. “There is a balanced mix between DIIs and FIIs, as we see it in most major IPOs. However, there is a clear trend where domestic investors, backed by the record inflow in mutual funds, are increasingly positive about domestic stories,” Arvind VashHydre’s head of equity markets said. “In many cases, DIs lead the price setup in IPOs, and given the depth of the local market, it gives an ease to issuers that IPOs are feasible at the right price and size.” The reversal of the order has a mint analysis of the Anchor investors awards since 2019 revealed how investors in domestic institutions gradually catch up to foreign portfolios in IPO anchor books. In 2019, while FPIs contributed £ 2,624 crore, this was £ 1.475 crore. Two years later, FPI awards rose to £ 29.030 crore, but household institutions significantly narrowed the gap by £ 16,433 crore. The turnaround came in 2022, when FPI anchor investments dropped to £ 7.105 and performed with a crore of £ 10.903. In 2024, the divergence became more outspoken – FIP subscribed £ 26.122 crore, while DIs exceeded £ 29,254 in Anker Awards. So far, until August 7, the pattern has held. Of the £ 61,499 crore collected by 37 IPOs, FPIs were a £ 8,913 crore in anchor investments and DIs for £ 10.306 crore. Mutual funds alone accounted for £ 7.920 crore. The growing dominance of mutual funds The broader reversal in IPO awards reflects the secondary market, where DIs – dominated by mutual funds – join FPI’s share. In the secondary market, investors buy shares from existing containers, and the money goes to the seller, not the company. This turnaround in favor of domestic institutions is likely to continue, with mutual funds-currently 10.5-11% of the secondary market against FPIs’ 17%-expected to catch up to foreign investors in the coming years, said Pranav Haldea, managing director of Prime Database Group. “Mutual funds now play a key role in the price of IPO, and use their size. Participation in the anchor book enables them to deploy large, regular inflow into fresh paper against pre-decisions, rather than just chasing a limited offer in already listed shares,” he said. Prakash Bulusu, joint CEO, private Wealth and Securities, IIFL Capital Services Ltd, added that the growing dominance of DIs in IPO anchor books represents a structural shift rather than a cyclic blip. “Over the past two years, strong domestic liquidity – powered by record inflow of mutual fund, expanding insurance penetration and deepening the participation of pension funds – significantly reducing the market’s dependence on foreign capital,” he said. “Regulatory initiatives, stable macro principles and the consistent performance of Indian stocks have further strengthened domestic conviction in primary issue.” On the other hand, global investors have become more selective due to moving global risk appetite, higher interest rates in developed markets, and a plethora of opportunities at home, “Bulusu added.” While we can see that tactical traces are in FPI participation during phases of global liquidity reduction, the underlying tendency is unlikely to be significantly reversed in the medium term. India’s IPO market is now anchored with a domestic pools of patient capital, which is positive for long-term market stability and resilience. “Catch all the business news, market news, break news events and latest news updates on live currency. Download the Mint News app to get daily market updates. More topics.
India’s IPO Power Shift: Domestic funds take the lead as FPI’s Retreat
