Foreign investors are continually withdrawing money, not caring about the devastation of the Indian stock market. The money withdrawal process that began in October continues. Foreign investors have withdrawn a record amount of Rs 26,000 crore in about 50 days. In such a situation, the most important question is: where do foreign investors get this money? If there had been an exodus of foreign investors to China’s stock markets, there would have been little change in the situation on the Shanghai and Hang Seng stock markets. The Hong Kong stock market has seen a drop of more than 4 percent in the past month. At the same time, the Shanghai index has seen an increase of just over 2 percent.
From this it can be clearly deduced that foreign investors do not withdraw money from the Indian stock market to invest it all in China. According to experts, foreign investors have adopted a new way of making money in the stock market. Now they are busy withdrawing money from the secondary market and making profits from the primary market. This means that the goal of FPI is to make money from the IPO. Let’s try to understand from the figures, where is this money going?
Record made by investment in IPO
Foreign investors have withdrawn record amounts from Indian stocks since October and this trend has not stopped yet. At the same time, FPIs are using this money to make profits from the IPO. Its primary market purchases, including IPOs and preferred stock sales, reached $11.5 billion this year, according to data released by Central Depository Services Ltd. This means foreign investors have surpassed their previous record from 2021. In Instead, global funds have sold more than $13 billion worth of shares on both stock exchanges. Therefore, a correction has been observed in Nifty, the main index of the National Stock Exchange.
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Why is love for IPOs increasing?
Deven Choksey, Managing Director of DR Choksey Finserv Private Limited, said in an ET report that foreign investors are now investing in many companies, i.e. IPOs, because they have the ability to generate returns at a very fast pace. On the other hand, the main reason for booking profits in the secondary market is the high valuation. India has become a hotspot for dealmaking, with companies raising a record $28.4 billion from initial public offerings and primary equity offerings this year, according to data compiled by primedatabase.com for Bloomberg. This is more than double the capital raised in 2023.
Companies fight to go public
Data shows that enthusiasm for new listings has also overshadowed their post-listing performance, with IPOs seeing an average rise of 24 percent on their first day of trading this year. The Nifty has fallen more than 10 percent from its September peak, but still trades at about 20 times its trailing 12-month earnings, the most expensive in the world. Still, some important public issues have struggled despite the rebound. Hyundai Motor Company’s Indian unit launched the country’s biggest IPO, worth $3.3 billion, listing at the biggest discount ever in India.
On the other hand, retail investors are avoiding IPOs due to valuation and growth concerns. Ola Electric Mobility Ltd shares are trading below their IPO price, after almost doubling in value in the first six sessions since its listing in early August. “Our clients believe now is a good time to be in India,” said Mike Sale, head of global emerging markets equities at London-based Alquity Investment Management Ltd.
