Foreign Portfolio Investors (FPIs) have shown a clear shift in behaviour over the past year. While reducing holdings significantly in the secondary market, they are building positions in India’s main-board IPOs through the primary route.
According to Capitaline data, in 2025 so far, FPIs have invested approximately ₹30,728 crore in main-board IPOs, even as they withdrew ₹1.37 lakh crore as of October 29, 2025 from the secondary market. The divergence is clear: FPIs are exiting broad market exposure while selectively building positions in new listings through the primary route. They have participated in most IPOs over the past five years, though their approach has become more nuanced. Their average allocation share has eased from around 30 per cent during the 2021 IPO boom to about 20 per cent in 2025, underscoring a move toward selectivity over scale.
Investor checklist
Retail investors should interpret this shift not as a signal to mimic FPI positions, but as a screen to identify potentially promising IPOs. FPIs’ presence in an IPO—especially in the anchor book—can serve as early validation of quality. However, it’s crucial to re-underwrite the fundamentals before investing, rather than relying solely on FPI interest.
Here’s how to use FPI behaviour to size, stage and exit IPO bets.
Participation: FPIs invest in both anchor and non-anchor segments of Indian IPOs, unlike domestic mutual funds with fixed sizes and selective mandates. FPIs include sovereign wealth funds, pension funds, banks, asset managers, hedge funds, endowments and family offices. They favour IPOs to access early-stage growth opportunities. Long-term investors, especially sovereign and pension funds, dominate anchor allocations. The QIB category forms 50-75 per cent of IPOs, with up to 60 per cent reserved for anchors. Non-anchor QIBs enable price discovery. FPIs often prefer non-anchor routes for lower thresholds and flexibility, allowing tactical diversification and alpha pursuit, especially in smaller offerings.
Understanding the behavioural shift: Retail investors must understand the macro context behind FPIs buying new while selling old—a shift driven by global risk aversion, a stronger US dollar, and rising bond yields that make secondary market valuations less appealing. With the Nifty 500 delivering 15 per cent annualised returns over the past decade as of December 31, 2024, FPIs may have found it an opportune time to book profits. IPOs, however, offer exposure to new growth stories. FPIs are realigning portfolios toward new-age sectors and businesses while shedding old-economy stocks. Retail investors should not mimic FPI positions but emulate their process—focusing on fundamentals, sectoral tailwinds and valuation discipline.
A quality filter, not a buy signal: Retail investors should treat FPI anchor participation as validation of quality, not a green light to invest blindly. Anchor investment signals institutional confidence in the issuer’s fundamentals, but it is not a guarantee of future returns. Retail investors must re-underwrite each IPO’s fundamentals before bidding. The presence of high-quality FPIs in the anchor book should narrow the shortlist, but the final decision must rest on independent valuation and business analysis. This approach helps avoid anchoring bias and herd behaviour.
Eye on lock-ins: Anchor investors face a staggered lock-in — 50 per cent of shares for 30 days, the rest for 90. Retail investors can track expiry dates to anticipate supply overhangs that may pressure prices. With short lock-ins, anchor investors—including FPIs—can exit quickly and may lack retail investors’ long-term view. Adding a calendar line to your IPO sheet noting anchor expiry helps time entries and exits. In 2025, FPIs are cautious in the secondary market but aggressive in IPOs, suggesting quick exits if performance falters. Retail investors must stay nimble and informed.
Align position sizing and sector focus: Retail investors should size IPO positions based on FPI selectivity and sectoral focus. FPIs have concentrated 2025 investments in software, finance and healthcare. Retail investors can mirror this by allocating 1-2 per cent per IPO and capping total IPO exposure at 5-10 per cent of their equity portfolio. This limits mistakes and prevents portfolio drift. Avoid micro-float issues with oversubscribed books, which carry higher exit risks. FPIs aren’t chasing every IPO—they’re backing select companies with strong fundamentals. Retail investors should follow suit, using FPI sectoral cues with their own valuation filters and risk controls.
Mixed performance: While FPIs have shown strong interest in select IPOs, their bets have not always guaranteed success. A three-year return analysis of IPOs with over ₹1,000 crore in FPI investment over the last five years reveals that 14 out of 17 stocks delivered positive returns, but the performance dispersion remains wide. Stocks such as Eternal, PB Fintech and Lodha Developers multiplied investors’ wealth several times, while Vedant Fashions and Star Health Insurance lagged. This underscores that FPI backing signals confidence but not certainty—post-listing performance depends on business fundamentals, execution quality and broader market sentiment.
Exit strategy: Retail investors can track FPI post-IPO behaviour via quarterly shareholding disclosures to stock exchanges. A consistent fall in FPI ownership signals weakening conviction—an early warning to reassess holdings. Note the time lag before data becomes public. Still, fundamentally-strong stocks with healthy growth prospects can be held long term. Monitoring FPI moves helps retail investors stay informed and responsive to changing institutional sentiment.
Published on November 1, 2025
