Foreign investors are continuously withdrawing money, not caring about the devastation in the Indian stock market. The process of withdrawing money which started from the month of October is continuing. Foreign investors have withdrawn a record amount of Rs 26 thousand crore in about 50 days. In such a situation, the biggest question is that where are the foreign investors taking this money. If there had been an exodus of foreign investors into China's stock markets, there would have been little change in the situation of the Shanghai and Hang Seng stock markets. Hong Kong's stock market has seen a decline of more than 4 percent in the last one month. At the same time, Shanghai's index has seen an increase of just more than 2 percent.
From this you can clearly guess that foreign investors are not withdrawing money from the Indian stock market and investing all of it in China. According to experts, foreign investors have adopted a new way of earning from the stock market. Now they are busy withdrawing money from the secondary market and earning profits from the primary market. This means that the focus of FPI is on making money from IPO. Let us try to understand from the figures where this money is going?
Foreign investors have withdrawn record amounts from Indian stocks since October and this trend has not stopped yet.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 earn profits from IPO. Their primary market purchases, including IPOs and preferential share sales, reached $11.5 billion this year, according to data published by Central Depository Services Ltd. This means that foreign investors have broken their previous record of 2021. In contrast, global funds have sold shares worth more than $13 billion on both the stock exchanges. Due to which correction has been seen in Nifty, the main index of National Stock Exchange.
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 profit booking in the secondary market is high valuation. India has become a hotspot for dealmaking, with companies raising a record $28.4 billion from IPOs and primary share offerings this year, according to data compiled by primedatabase.com for Bloomberg. This is more than double the capital raised in 2023.
Data shows that enthusiasm for new listings has also overshadowed their post-listing performance, with IPOs seeing an average rise of 24 per cent on their first trading day this year. The Nifty has fallen more than 10 per cent since its September high but still trades at close to 20 times its 12-month forward earnings, the most expensive in the world. Still, some large public issues have struggled despite the rally. Hyundai Motor Company's Indian unit launched the country's biggest IPO of $3.3 billion - listing at the biggest discount ever in India.
On the other hand, retail investors are avoiding IPOs due to concerns about valuation and growth. Shares of Ola Electric Mobility Ltd are trading below their IPO price, after almost doubling their value in the first six sessions since its listing in early August. “Our clients think 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.
