FII Outflows Near ₹2.8 Lakh Crore as IPO Buying Surges

Foreign investors have withdrawn nearly ₹2.8 lakh crore from India’s secondary market in 2026 while investing more than ₹47,000 crore in initial public offerings, highlighting a sharp shift in how overseas institutions are accessing Indian equities.

The changing pattern comes as FII ownership of Indian equities has fallen to a 14-year low of 14.7%, while domestic institutions now hold 18.9%. The NSE IPO scheduled to open on September 17 is expected to test institutional appetite.

Foreign Investors Exit Listed Equities, Buy Into IPOs

According to the Economic Times, analysts say IPOs provide foreign investors with access to large block allocations at fixed prices in sectors such as renewables and electronics manufacturing, where listed peers are limited.

Foreign portfolio investors have already withdrawn more money from Indian equities in 2026 than they did during all of 2025. NSDL data showed that FPI outflows in 2026 had exceeded the ₹1.66 lakh crore withdrawn during the whole of 2025, with ₹7,443 crore pulled out in early September alone.

Cumulative 2026 outflows have also been reported at more than ₹2.32 lakh crore. Bloomberg reported that some global funds, including Singapore’s Reed Capital Partners, had reduced their India allocations to zero, with one investor describing India’s growth story as “withering.”

World Bank’s Neelkanth Mishra told Moneycontrol that a narrowing rate gap and crude oil near $100 a barrel were giving foreign investors structural and tactical reasons to remain cautious.

India Fund Redemptions Moderate

Despite the large cumulative outflows, weekly redemptions from India-focused funds eased to about $100 million last week, according to Elara Capital’s Global Liquidity Tracker. That was lower than the $170 million to $366 million recorded in previous weeks.

Taiwan and South Korea saw heavier redemptions, allowing India and China to relatively outperform on fund flows over the past two months, the report said.

Elara Capital said foreign fund redemptions from India had moderated sharply even as cumulative 2026 equity outflows remained above ₹2.32 lakh crore.

IPO Demand Remains Strong Despite Market Pressure

Investor demand for new issues has remained strong. Rentomojo’s ₹1,256-crore IPO closed with subscription of 72.88 times, while Karamtara Engineering’s ₹875-crore issue was subscribed 62.63 times.

Qualified institutional buyer demand exceeded 159 times for both issues. Four other IPOs — Arcil, LCC Projects, Steamhouse India and Manipal Payment — also closed fully subscribed.

The six mainboard IPOs that opened together on September 9 marked the first time in 30 years that so many had launched on the same day, according to the Economic Times. Eight IPOs were open for bidding on Friday.

The shift towards IPOs has unfolded alongside renewed pressure on Indian financial markets. India’s benchmark 10-year bond yield breached 7% on Friday for the first time in more than three months and settled at 7.017%.

Brent crude had surged about 22% in less than a fortnight to above $108 a barrel amid Middle East supply threats, while US Treasury yields were near 5%. The Sensex and Nifty 50 ended lower on Friday, India VIX rose nearly 4%, and markets were pricing roughly a 70% probability of a Federal Reserve rate increase the following week.