IPOs take a breather as foreign investors return amid stock market rebound

The Indian IPO market has seen a slowdown in recent weeks following a flurry of activity over the past couple of months, even as the broader stock market has staged a rebound after a difficult spell.

The market recovery has been accompanied by a sharp turnaround in foreign flows, with foreign institutional investors (FIIs) making some of their biggest single-day purchases in years.

If market sentiment remains positive, analysts say this slowdown could provide the much-needed liquidity to the stock market and add to the rebound.

In September and October, 46 companies raised about Rs 85,000 crore in the market through mainboard IPOs, including the National Stock Exchange (Rs 22,563 crore) and Jio Platforms Ltd (Rs 30,188 crore), breaking the record for funds raised in a single month.

This was after a lull in the initial months of the year, as many companies with in-principle IPO approvals from the Securities and Exchange Board of India (SEBI) paused their fundraising activities due to the uncertain market conditions caused by the West Asia war.

However, activity steadily picked up since July, when SBI Funds Management launched its IPO. The market regulator then extended the expiry for all IPO approvals ending between April and September to September 30, leading to companies scrambling to go through with their IPO plans before the deadline as market conditions improved.

With this boost, issues open at a time often extended into double digits at points during the past couple of months. However, after this surge, there are no mainboard IPOs open currently. The last major IPO was that of Jio Platforms late last month.

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This slowdown has coincided with astounding gains in the secondary market, as the Nifty 50 and Sensex indices have gained 8-9% since the start of November, going on a seven-session winning run.

Tanvi Kanchan, Associate Director at Anand Rathi Share and Stock Broking, believes that the pause in IPO activity “freed up liquidity just as foreign money started returning to secondary markets, on the backdrop of falling crude, easing US yields and the global rotation out of AI stocks.”

“The real drivers of this rally are macro and flows, but the end of the supply overhang removed a headwind at exactly the right time,” she added.

Foreign investors return

Foreign investors had pulled out funds worth nearly $32 billion from the stock market so far this year, until last month.

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These investors had dumped stocks worth over $7 billion over the past couple of months, coinciding with the IPO boom and also a sharp 4% fall in the stock market. However, they continued to participate heavily in the primary market, with analysts believing that this sucked liquidity away from the secondary market.

For example, foreign investors racked up nearly 45% of the anchor pool allotted for the issue of Jio Platforms. In the case of National Stock Exchange’s IPO, this number was at 40%. Anchor investors invest ahead of an IPO’s public opening, and their participation signals confidence in the company while improving its credibility during the listing process.

A slowdown in IPOs has now coincided with foreign investors returning to the secondary market. So far, FIIs have bought shares worth around $5 billion in November. This includes Rs 14,000 crore-Rs 15,000 crore of shares bought each on Thursday and Friday—some of the biggest single-day purchases in years.

“It is clear to see that FIIs have definitely returned for the moment. However, whether this momentum lasts depends on what happens in West Asia, and then earnings growth is the war situation settles down for good,” a research head at a domestic broking firm said.

Fundraising may gather pace

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Currently, around 120 companies with SEBI approvals are in line to launch their IPOs, targeting to raise around Rs 2 lakh crore collectively. Despite this strong pipeline, experts believe activity may slow down before accelerating next year.

“More than 20 issues are expected in the second half of November and December. The second half of the year won’t have the noise and mega-issues and frenzied listing gains, but more mid-sized, more valuation-sensitive deals,” said Anand Rathi’s Kanchan.

“If global volatility around AI, the Fed and oil settles, India has all the ingredients for another strong primary-market cycle in 2027: deep domestic savings, record SIP (Systematic investment plan) flows and a crowded pipeline,” she added.