Foreign portfolio investor participation in Indian IPO anchor books has fallen to 36.16%, a five-year low, as global funds pull back amid valuation concerns. Domestic institutional investors are now driving price negotiations, filling the gap with consistent domestic inflows. While large-cap interest remains, the shift marks a significant change in the Indian primary market.
The composition of India's primary market is seeing a major change as foreign portfolio investors (FPIs) reduce their stake in initial public offerings (IPOs). Data shows that FPI participation in anchor books—where large investors are allotted shares before the public issue—has dropped to 36.16% in 2026. This is a sharp decline from the 62.75% peak seen in 2021.
This shift highlights a growing divide between foreign and domestic sentiment toward Indian equities. In 2026 alone, FPIs have been net sellers, pulling out roughly ₹3.08 lakh crore from the Indian equity markets. This pullback is largely driven by global factors, such as higher US bond yields and a strategic move by global funds to shift capital toward artificial intelligence and other technology-heavy sectors in developed markets.
Domestic Institutions Take Charge
As foreign participation wanes, domestic institutional investors (DIIs), including mutual funds and insurance companies, have stepped in to stabilize the market. This surge in domestic support is powered by record-high monthly contributions through systematic investment plans (SIPs), which reached ₹32,490 crore in September 2026. This consistent flow of local capital has provided issuers with a reliable safety net, allowing companies to proceed with IPOs even when global interest is weak.
The increasing dominance of DIIs has also changed how companies price their IPOs. With fewer foreign bids, domestic institutions now have a stronger hand in negotiations, acting as a check against aggressive or over-priced valuations. Industry data reflects this change, with average P/E multiples for new IPOs falling by approximately 40% in 2026 compared to the previous year, showing a clear return to valuation discipline.
Selective Interest Still Exists
Despite the broader retreat, foreign investors are not abandoning India entirely. Instead, they have become highly selective. The recent IPO of Jio Platforms, which listed on October 28, 2026, serves as a prime example. The offering, valued at around ₹30,213 crore, saw strong subscription demand, proving that global capital is still available for high-growth, high-profile companies with clear business advantages.
Risks and Monitorables
While the domestic market has proven resilient, analysts highlight several risks that investors should track. The current primary market stability relies heavily on continuous SIP inflows and domestic liquidity. Any disruption in this local capital pool could impact the ability of companies to launch IPOs successfully. Furthermore, the 12.5% long-term capital gains (LTCG) tax continues to be a point of discussion regarding its long-term impact on the attractiveness of Indian investments for foreign players. Regulators like SEBI are also reviewing onboarding norms to ensure that the process for foreign entities remains efficient. Moving forward, the primary market will likely depend on whether valuations remain attractive and if the gap between Indian equities and other emerging markets narrows, potentially drawing foreign capital back to the country.