FPI Flows into India Were “Saved” by IPOs and Debt - Secondary Equities Told a Different Story

If you only look at the headline number, the last four years look pretty good for India.

Total FPI inflows over the last 4 years add up to ₹1,75,042 crore. Sounds like strong foreign interest, right?

But zoom in and the picture flips. FPIs have actually been heavy sellers in secondary market equities. The overall inflow number stayed positive mainly because of debt inflows and IPO participation.

The Big Split: Debt In, Listed Equities Out

Over the last four years combined:

• FPIs were net buyers in debt worth ₹2,83,355 crore.
• FPIs sold equities worth ₹(1,08,313) crore.

So where did the “positive overall” come from?

Because the equity number itself hides a sharp divide between primary markets (IPOs) and secondary markets (listed stocks).

IPOs vs Secondary Market: The Real Story

That net equity selling of ₹(1,08,313) crore includes two opposite flows:

• IPO (primary market) inflows: ₹2,63,176 crore
• Secondary market equity outflows: ₹(3,71,489) crore

In plain terms: FPIs didn’t “exit India”. They reduced exposure to listed equities, but still participated in IPOs where they felt pricing and allocations worked better.

So the caution wasn’t about India as a destination. It was about where value existed and how risky the listed market looked at those valuations.

The Data Table: Secondary, Primary, Equity, Debt, Overall

Data Source: NSDL (# data up to December 26, 2025). Absolute numbers are ₹ crore.

What Stands Out in These Four Years?

1) Debt turned into the “steady lane” from 2023

Debt flows became meaningfully positive from 2023. A big trigger was the inclusion of Indian government bonds in global bond indices, which brought in index-linked passive flows. Add rate-cut expectations and debt started looking like a cleaner, lower-volatility bet.

2) IPO enthusiasm peaked in 2024, cooled in 2025

In 2024, IPO participation was strong. In 2025, IPO inflows were about 40% lower than 2024 even though total IPO collections were similar. The gap suggests something important: domestic institutions like mutual funds and AIFs became more prominent as anchor investors, while FPIs became more selective.

3) Secondary market equities faced persistent selling

The harshest message is in secondary equities. Over four years, FPIs have net sold roughly $45 billion in listed equities (as per the source note). The pressure wasn’t one-off. It kept showing up whenever valuations looked stretched or risk perception rose.

Why Were FPI Flows So Event-Driven?

Over the last four years, FPI behaviour has looked less like a steady “India allocation” and more like a sequence of reactions to specific triggers.

Valuations stayed sticky

Many FPIs were uncomfortable with India’s Buffett ratio staying above 120 for most of 2025. When valuations feel expensive, the easiest action is to trim secondary equities, especially in large index names.

Reform continuity became a question mark

Over the last ~18 months after the coalition NDA government returned for a third term, FPIs have been more cautious about the pace and continuity of reforms. Whether that concern is fully justified or not, it influenced risk appetite.

IPO pricing left less “on the table”

In 2024, IPOs drew strong interest. But as IPO valuations got richer, FPIs reduced exposure even there. When the upside looks limited, primary market appetite cools.

Bond flows got a structural tailwind

Bond index inclusion plus expectations of rate cuts created a supportive setup for debt inflows. This is the part of the FPI story that looks the most structural, not tactical.

Rupee volatility changed the math

For an FPI, returns are measured in dollars. A volatile rupee can wipe out equity gains even if the market performs in INR. Concerns around carry trade, INR vulnerability, and currency swings made India allocations less comfortable.

Geopolitics and trade risk added friction

US sanctions, delays in the Indo–US trade deal, and discomfort around India buying Russian oil amid Western sanctions created a layer of uncertainty. For large global funds, uncertainty often equals lower position sizes.

So What Does This Mean for Indian Markets?

Three simple conclusions:

• Headline FPI inflows can mislead. Overall numbers looked fine because debt and IPOs compensated for secondary equity selling.
• FPIs have become selective, not absent. They still participate where risk-reward looks reasonable (debt, some IPOs), but they cut exposure when valuations and currency risk rise.
• Domestic capital matters more than ever. With FPIs cautious in secondary equities, the role of SIP flows, domestic institutions, and long-term household participation becomes critical in stabilising markets.

In short: the last four years weren’t a clean “FPI love story” for Indian equities. It was a story of debt turning supportive, IPOs offering windows of interest, and secondary equities facing repeated valuation-led selling.

Key Takeaways

• Total FPI inflows over four years were ₹1,75,042 crore, but the composition matters more than the headline.
• FPIs bought ₹2,83,355 crore of debt but sold ₹(1,08,313) crore of equities overall.
• IPO inflows of ₹2,63,176 crore masked secondary market outflows of ₹(3,71,489) crore.
• Debt flows strengthened after bond index inclusion and rate-cut expectations.
• Secondary equity flows were driven by events: valuations, reforms, rupee volatility, and geopolitics.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice.