Foreign institutional investors (FIIs) played a strategic game in 2024, offsetting heavy selling in the secondary market with aggressive investments in primary markets like initial public offerings (IPOs) and qualified institutional placements (QIPs). This trend, highlighted by market veteran Samir Arora, founder of Helios Capital, sheds light on how FIIs balanced their portfolio activity during the year.
FII Selling in Secondary Markets
Data reveals that FIIs offloaded equities worth ₹1.19 lakh crore through secondary market transactions in 2024. October and November witnessed significant selling pressure due to high valuations, but the trend slowed in December. Despite this selling spree, FIIs remained net investors in India, thanks to substantial purchases in the primary market.
Compensatory Investments in IPOs and QIPs
Samir Arora responded to a tweet by Safir Anand, a renowned IPR lawyer, who pointed out that 2024 saw the second-highest FII selling in a decade. Arora argued that FIIs compensated for their secondary market exits by investing more aggressively in primary issues, such as IPOs and QIPs.
On the social media platform X, Arora stated, “FII flows are overall positive in India in 2024. While FIIs sold heavily in secondary markets, they bought even more in primary issues and QIPs.”
This year’s IPO boom provided ample opportunities for FIIs to invest, with fair valuations making these offerings particularly attractive compared to overvalued secondary market equities.
Insights from Market Experts
Samir Arora’s Perspective
Arora also humorously remarked on India’s role in global markets, saying, “Since India is one of the few markets open on January 1, 2025, it is our collective responsibility to spread cheer around the world tomorrow. A strong Indian market can set a positive tone for the year.”
V K Vijayakumar on FII Trends
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, supported Arora’s claims with data. He noted that while FIIs sold ₹1.19 lakh crore in equities through exchanges, they simultaneously invested ₹1.21 lakh crore in primary markets. Vijayakumar highlighted that FIIs’ preference for IPOs and QIPs stemmed from fairer valuations in these offerings.
Additionally, FIIs invested ₹1.12 lakh crore in the Indian debt market, further showcasing their long-term confidence in the country’s economic prospects.
Outlook for 2025
As 2025 begins, market watchers remain cautious about FII behavior, particularly in light of global economic conditions. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, anticipates that FIIs may initially turn net sellers in early 2025. This prediction is grounded in the ongoing appreciation of the US dollar, with the dollar index consistently staying above 108. Additionally, the appeal of US 10-year bond yields, which are currently hovering around 4.4%, could shift FII focus toward the relatively safer and lucrative returns offered by the US debt market. Such a scenario may lead to a temporary outflow of foreign capital from Indian equity markets, especially in the absence of immediate growth catalysts domestically.
However, the long-term outlook for Indian equities remains optimistic. Vijayakumar believes that once signs of growth revival and earnings recovery emerge, FIIs are likely to return as active buyers in the Indian markets. The country’s strong macroeconomic fundamentals, coupled with favorable demographic trends and a vibrant entrepreneurial ecosystem, make it an attractive destination for foreign investors. While the initial months of 2025 may witness some volatility, the medium-to-long-term prospects for Indian equities appear robust, supported by expectations of a stabilizing global economic environment and the enduring appeal of India’s growth story.
Conclusion
The year 2024 showcased a fascinating duality in FII behavior. While they pulled back from secondary markets due to high valuations, their investments in IPOs and QIPs underscored their confidence in India’s growth story. As the Indian market prepares to ring in 2025, all eyes remain on how FII trends evolve in the face of global economic shifts and local market dynamics.
By strategically balancing their portfolio, FIIs demonstrated their ability to adapt to changing market conditions, ensuring India remains a key destination for foreign investments.