With around 34 IPOs hitting the primary market in September and a couple more expected, foreign portfolio investors (FPIs) continued to deploy capital through the primary market. According to NSDL data, FPIs invested ₹8,551 crore in IPOs through 25 September.
At the same time, FPIs continued to sell equities through stock exchanges. This divergence has taken their total equity selling through exchanges in 2026 to ₹2,95,971 crore, while investments through the primary market during the same period stood at ₹54,398 crore, according to NSDL data.
The shift in FPI flows became evident earlier this month after positive inflows in July and August. Equity outflows through exchanges stood at ₹25,682 crore as of 25 September, highlighting continued selling pressure in the secondary market. At the same time, FPIs invested ₹8,551 crore in IPOs, pointing to a clear divergence in their approach to Indian equities.
Mohit Gulati of ITI Alternates said this divergence highlights two key trends. “FPIs selling ₹25,682 crore in the secondary market while putting ₹8,551 crore into IPOs tells you two things,” he said. According to Gulati, India has lost some of its mojo in the minds of global allocators, with relative valuations, a weaker rupee, and better opportunities elsewhere pushing the country down the priority list.
He added that the IPO pipeline is largely serving as an exit window for private equity and venture capital investors, who are monetising investments made over several years. “FPIs are picking selectively from that supply, not buying India broadly,” Gulati said. However, he noted that India remains deeply diversified across sectors, themes and company sizes, while strong domestic flows continue to support the market. “Global money chases growth eventually, and when the cycle turns, India will be among the first markets it returns to,” he added.
| FPI flows in 2026 | ( ₹ crore) |
|---|---|
| January | -35,962 |
| February | 22,615 |
| March | -1,17,775 |
| April | -60,847 |
| May | -32,963 |
| June | -49,340 |
| July | 20,200 |
| August | 29,631 |
| September | -17,131 |
| Total 2026 | -2,41,572 |
| Source: NSDL Data |
FPI outflows through exchanges stood at ₹35,962 crore in January, while inflows in February totalled ₹22,615 crore. March saw the highest monthly outflows at ₹1,17,775 crore, followed by ₹60,847 crore in April, ₹32,963 crore in May, and ₹49,340 crore in June. FPI flows turned positive in July and August, with inflows of ₹20,200 crore and ₹29,631 crore, respectively. However, the trend reversed in September, with outflows of ₹17,131 crore recorded, according to the data provided. Overall, FPI outflows through exchanges stood at ₹2,41,572 crore in 2026.
FPIs chase momentum in IPOs and mid- and small-caps
According to market experts, elevated US bond yields and the prospect of better returns from India’s IPO market could keep this trend intact. Another notable pattern is that while FPIs have remained sellers in large-cap stocks, they have continued to buy mid- and small-cap stocks, indicating that they are also participating in pockets of market momentum.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, said FPIs are also chasing short-term market trends. He noted that IPOs have delivered superior returns since June, prompting FPIs to consistently participate in the primary market. At the same time, mid- and small-cap stocks have outperformed large-caps, prompting FPIs to sell large-cap stocks and buy into mid- and small-cap segments.
According to Vijayakumar, this has created a significant valuation gap between relatively fairly valued large-caps and overvalued mid- and small-caps, a divergence he said is unlikely to persist indefinitely. He expects a mean reversion, while noting that elevated crude oil prices and bond yields are currently keeping pressure on the broader market.
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