FIIs account for 24% of secondary-market selling into primary issues in 12 months

According to fresh market updates, Foreign institutional market participants (FIIs) have channelled nearly a quarter of the money they pulled from Indian stocks in the secondary market into fresh share issuances during the past year, making the primary market an important outlet for foreign capital even as their broader equity holdings have declined.

FIIs sold a net Rs 3.38 lakh crore ($36.5 billion) of equities in the secondary market in the 12 months through August, while investing around Rs 80,000 crore ($8.7 billion) in IPOs, QIPs and other primary issuances, according to data from JM Financial Institutional Securities. The primary-market investment was equivalent to 23.6 percent of their secondary-market selling.

The allocation towards fresh issues has advanced relevance as foreign market participants have started buying Indian equities again. FIIs were net buyers for a second consecutive month in August, investing Rs 24,440 crore. Of this, Rs 12,610 crore went into primary-market issuances and Rs 11,830 crore into secondary-market stocks. In July, the corresponding inflows were Rs 12,290 crore and Rs 11,040 crore. FII ownership keeps slide

The renewed buying has not yet reversed the longer-term slide in foreign ownership. FII ownership of Indian equities declined to 14.2 percent in August 2026 from 20 percent in August 2016, a slide of 580 basis points.

Their equity assets under custody stood at Rs 70.4 lakh crore at the end of August, little changed from Rs 70.2 lakh crore a month earlier.

Domestic institutions have moved in the opposite direction. DII ownership stood at 18.9 percent in June, giving them a 4.7-percentage-point lead over FIIs.

Domestic market participants overtook foreign institutions in ownership in December 2024, underscoring the growing role of local capital in Indian equities.

BFSI stocks see biggest turnaround

The August flows additionally show that foreign market participants were selective in where they put their money. Banking, financial services and insurance stocks saw the biggest turnaround, with FIIs switching from net selling of Rs 686 crore in July to buying worth Rs 10,198 crore in August.

Auto and capital goods additionally saw a reversal. FIIs bought $326 million of auto stocks in August after selling $472 million in July, while capital goods attracted $63 million following $655 million of outflows a month earlier.

Telecom remained an exception. FIIs sold Rs 4,840 crore of telecom stocks in August after Rs 5,544 crore of selling in July, taking cumulative outflows from the sector over the two months to Rs 10,384 crore.

FMCG, oil and gas and power additionally recorded net selling in August.

India attracts $2.56 billion in August

The shift in foreign flows came even as the broader market softened. The Nifty 50 declined 1.2 percent in August, despite Rs 58,270 crore of net buying by domestic institutional market participants.

India nevertheless attracted $2.56 billion of foreign inflows in August, second only to Taiwan among major emerging and Asian markets.

At the same time, India’s weight in the MSCI Emerging Markets Index declined to 11.3 percent from 11.7 percent in July and 16.2 percent a year earlier.

BFSI remained the largest sector in FII portfolios, accounting for 30.1 percent of assets under custody in August. Auto accounted for 7.8 percent, pharmaceuticals 7.7 percent, capital goods 7.3 percent and oil and gas 6.5 percent.

The Nifty 50 is trading at 17.4 times one-year forward earnings, in line with its long-term historical average.

JM Financial anticipates earnings per share to climb 15.1 percent in FY27 to Rs 1,230 and 17.7 percent in FY28 to Rs 1,447, with return on equity rising to 16.3 percent by FY28.