Overseas investors, who typically favour investing in well-established companies, seem to be changing their stance as they actively participate in the primary market. July data shows that although FPIs continue to pull significant funds from the secondary market, they are increasingly preferring IPOs.
FPIs remained net sellers through most of July, offloading local equities in 14 out of 19 trading sessions so far and withdrawing a total of ₹20,262 crore from the Indian stock market, as per the NSDL data.
This trend reflects a tepid start to the June quarter earnings season, which failed to ease valuation concerns, while the strengthening US dollar and rising US Treasury yields have also impacted inflows. The easing of tariff-related concerns and progress in trade deals with major partners are currently supporting the US dollar’s strength.
Even during the five sessions in which FPIs were net buyers, inflows remained marginal, highlighting their cautious approach toward domestic equities. However, they invested ₹13,760 crore in the primary market, which analysts explain is due to lower valuations in IPOs compared to the secondary market.
Looking at broader data, FPIs have sold ₹1.20 lakh crore worth of Indian stocks through the secondary market so far in the current calendar year but invested ₹35,747 crore in the primary market, the NSDL data shows.
Dr. VK Vijayakumar, Chief Investment Strategist, said, “The consistent buying by FPIs in the primary market contrasts with their selling through the exchanges. This trend holds true for CY2025 as well. Lower valuations in the primary market and higher valuations in the secondary market explain this paradox.”
“In July, FIIs have been continuous sellers in the IT segment while they were buyers in banking and financial services. Early Q2 results—with strong earnings from major banks and weaker results from IT companies—validate this FPI strategy,” he further added.
DIIs shield market from FPI selling pressure
FPI selling in July has shown little impact on the Indian stock market as domestic institutional investors (DIIs)—largely driven by mutual funds—are actively absorbing the pressure from the FPI sell-off.
According to exchange data, DIIs have purchased ₹37,687 crore worth of Indian equities in July so far, more than offsetting the FPI outflows. DIIs have remained net buyers since August 2023.
In H1 CY26, DIIs bought stocks worth ₹3.57 lakh crore, marking the strongest-ever half-yearly inflows. This represents 68% of the full-year inflow of ₹5.26 lakh crore recorded in 2024 and is nearly double the ₹1.81 lakh crore inflow seen in 2023.
DIIs began the year aggressively, buying shares worth ₹86,591 crore in January, followed by ₹64,853 crore in February. While inflows softened over the next two months, they picked up pace again in May and June, with ₹67,642 crore and ₹72,673 crore, respectively, largely driven by a surge in block deals.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
