Domestic share sales are seeing record purchases by global funds

Elevators travel next to electronic boards displaying stock figures at the National Stock Exchange of India Ltd. (NSE) building in Mumbai, India, on Friday, Dec. 16, 2016. The NSE plans to file a draft prospectus this month for an initial public offering of about 100 billion rupees ($1.5 billion), pushing ahead with the nation's biggest listing in more than six years after its top executive resigned, people with knowledge of the matter said. Photographer: Dhiraj Singh/Bloomberg

Foreign investors are pulling record sums from Indian shares since October and piling into initial public offerings in search for better returns.

Their primary market purchases, including IPOs and preferential share sales, hit $11.5 billion this year, surpassing the previous record set in 2021, according to data published by Central Depository Services Ltd. In contrast, global funds have sold more than $13 billion on the exchanges, helping send the main NSE Nifty 50 index into correction.

“Foreign investors are investing in new papers since they have the ability to generate returns at a much faster pace,” said Deven Choksey, managing director at DRChoksey FinServ Pvt. “Selling in the secondary market, meanwhile, is driven by expensive valuations.”

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. That’s more than twice the capital raised in 2023.

Enthusiasm for new listings has carried over to their post-listing performance, with IPOs having risen by an average of 24% on their first trading day this year, the data show. The Nifty has fallen more than 10% since its September peak but still trades near 20 times its 12-month forward earnings, among the most expensive in the world.

Still, some big-ticket public offerings have struggled despite the boom. Hyundai Motor Co.’s Indian unit saw its $3.3 billion offering — India’s largest ever — list at a discount, with retail investors avoiding the IPO amid concern over valuation and growth. Shares of Ola Electric Mobility Ltd. are trading below their IPO price, after almost doubling in value in the first six sessions since listing in early August.

“Our clients think now is a great time to get into India,” said Mike Sell, head of global emerging market equities at London-based Alquity Investment Management Ltd. The investment case for India remains “absolutely undimmed” for strategic investors despite the recent selloff, he said.