Indian IPO market powers ahead in 2025 even as foreign investors pull back

India’s initial public offering (IPO) market has emerged as one of the strongest globally in 2025, defying weak secondary markets and a sharp pullback by foreign investors.

According to a report by Motilal Oswal Financial Services, Indian companies have raised about $21.7 billion through IPOs so far this year, surpassing the amount raised in 2024, which was in itself considered a blockbuster year for primary markets.

This surge has come amid uneven equity market performance, persistent currency pressures, and record foreign portfolio investor (FPI) outflows. Net FPI withdrawals have reached $17.6 billion in 2025, driven by concerns over the rupee’s depreciation, tighter global liquidity and the absence of a formal US–India trade agreement.

Limited impact

Yet these headwinds have had only a limited impact on IPO pipelines.

Market participants argue that the explanation lies in a structural shift underway in India’s capital markets, one that is increasingly powered by domestic investors rather than foreign capital.

Also read: Foreign investors largely stayed off India in 2025, may do so in 2026 too

Domestic mutual funds, insurance companies, and pension funds have continued to deploy capital steadily, while retail participation has remained strong through systematic investment plans (SIPs).

Indian SIP investors put in roughly $33.4 billion in 2025, creating a stable pool of long-term capital that is increasingly absorbing primary market issuance.

This steady inflow has helped insulate IPO activity from the volatility affecting foreign flows.

Sector diversification

The composition of companies tapping the primary market has also shifted. There is clear diversification in sector participation in 2025, with non-banking financial companies (NBFCs) leading fundraising with a 26.6 per cent share, followed by capital goods, technology, healthcare and consumer durables.

This marks a departure from 2024, when IPO activity was concentrated in automobiles, telecom, and retail. Sectors such as utilities and private banking, which were significant contributors last year, recorded no IPO fundraising in 2025.

This broader sector mix, tilted toward businesses with established cash flows and clearer earnings visibility, has helped sustain investor confidence and limit post-listing volatility despite wider market uncertainty.

Exit strategy

Private equity and venture capital investors have used India’s IPO window as a meaningful exit route in 2025, following two years of delayed monetisation during the global risk-off phase.

After the exit values stagnated at around $20 billion in 2023, PE and VC exits rebounded to roughly $27 billion in 2024 and are tracking above $30 billion in 2025, aided by stabilising valuations, improved regulatory clarity, and stronger domestic institutional demand.

Also read: Corporate deals and IPOs push ahead despite volatility in Indian equities

IPOs have re-emerged as a credible exit channel, enabling investors to realise proceeds from listings such as Ather Energy and Lenskart, with quarterly exit run-rates in 2025 remaining well above recent years. This rebound reflects improving liquidity conditions for alternative investors and growing comfort with public-market exits, even amid global macro uncertainty.

Low equity penetration

India’s equity penetration, however, remains relatively low by global standards.

Also read: Rupee fall past 90 exposes cracks in India’s economic outlook

A Bain & Company report found that only 15 to 20 per cent of Indian households invest in equities and mutual funds, compared with 50 per cent to 60 per cent in the United States. That gap suggests substantial headroom for the expansion of domestic capital markets as household savings continue to shift toward financial assets.

Risks prevalent

However, risks still remain. Prolonged global uncertainty or a sharp slowdown in domestic inflows could test the market’s ability to absorb continued issuance.

A crowded IPO calendar may also lead to greater investor selectivity, particularly for smaller or lower-quality offerings.

Now, what sets India’s IPO market apart in 2025 is not the size of the deals - but who is funding them. With foreign investors pulling back, domestic capital has become the market’s shock absorber, a trend that may outlast the current cycle.