Foreign investors in India have been offloading equities since October and it has turned out to be a caution for the other investors. The markets have fallen drastically in the past month and most sectors are bleeding. However, are these foreign investors actually fleeing from the market or just parking their funds somewhere else? Let’s find out in this article today to have a better understanding of what’s actually going on in the market.
Primary Market Purchases Rising
The foreign investors are taking part in the primary market a lot more than before. They are parking their funds in the initial public offerings (IPO) as they seem to offer quicker returns and higher returns many times. This year, until now, foreign investors have put in around $11.5 billion into IPOs and the sale of preferential shares. This figure has surpassed the earlier record amounts of 2021 as well. However, while they were buying newly launched securities, they sold existing securities worth Rs. 13 billion on the stock exchanges and this has been one of the primary reasons for the stock market to go into the correction phase with Nifty Sensex dropping over 5% in a month.
While return generation is simpler and faster amongst the newly launched shares is pulling foreign investors towards them, it is also the expensive valuations of the existing stocks that are drifting foreign investors in India away from existing stocks.
Why this shift is happening?
India’s primary market has been witnessing a booming era and has become a hotspot for groundbreaking deals. In 2024 to date, $28.4 billion has been raised from initial public offerings which is twofold the amount raised in 2023.
The listing gains have been playing a major role here for which the retail as well as the foreign investors are being attracted to the new launches. The average listing gains recorded is a 24% rise in the share price on the first day of trading this year, which is significantly high.
Having said that, few IPOs haven’t worked well and even some of the large-scale IPOs are on this list such as Hyundai Motor’s $3.3 billion IPO was listed at a discount. This is due to the overvaluation in the market which is investors worried about.
Wrapping up
With the dipped prices in the stock market, it seems that foreign investors are going to return now to the markets again. As the prices are corrected, the valuations have improved as well. It will be interesting to see how their comeback shapes the market and how domestic investors and retail investors react to the same.
Source: TheEconomicTimes
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