India’s IPO market is showing signs of a slowdown after record fundraising in FY25, with fewer listings and weaker post-listing performance in early FY26.

IPO Momentum Slows in Early FY26 as FII Outflows Rise, Domestic Money Cushions Market

After a record-breaking run in 2025, India’s primary market is beginning to cool. IPO activity is slowing, but the reason for the shift is more structural than cyclical. The frenzy seen across 2024 and 2025, which was marked by oversubscription and strong listing gains, has given way to a more selective environment in early FY26.

Data shows that while FY24 saw around 76 mainboard IPOs raising ₹61,900 crore, activity accelerated sharply in FY25 before tapering towards the end of the year.

FY25 began on a strong note, with about 13 IPOs raising ₹16,600 crore in Q1, followed by 26 IPOs in Q2 raising ₹34,400 crore, when retail participation peaked with oversubscription levels crossing 35 times in several issues. Momentum remained high in Q3, with 30 IPOs raising nearly ₹95,500 crore, driven by large-ticket offerings. However, by the final quarter, activity dropped sharply to around 11 IPOs raising ₹16,500 crore, indicating early signs of fatigue.

In early FY26, activity has remained muted. The total fundraising is estimated at around ₹22,000 crore so far, alongside more modest subscription levels and weaker listing performance.

FII Exit, DII Support

The more significant change is in the source of capital and not the volumes. Foreign institutional investors have turned into consistent sellers in early 2026. In a single session last week, they pulled out over ₹10,700 crore. Hence, showing concerns over valuations, a stronger US dollar, and relatively better yields in developed markets.

At the same time, domestic institutional investors have stepped in to absorb the outflows. On that same day, DIIs bought nearly ₹10,000 crore. This played a role in stabilising markets. According to estimates, domestic institutions now hold about 18.7% of NSE-listed equities, hence surpassing foreign investors.

Manoj Puravankara, Co-founder and Group COO, Atom Privé Financial Services, said, “A major structural shift underpinning the market today is the rise of domestic capital. Domestic institutional investors now hold about 18.7% of NSE-listed equities, surpassing foreign institutional investors and marking a historic change in market ownership. This ‘Atmanirbhar market’ has undoubtedly provided stability, especially at a time when foreign investors sold close to ₹2 lakh crore worth of equities during 2025, but domestic liquidity alone cannot indefinitely justify stretched IPO valuations.”

Valuation Concerns

The IPO market’s cooling is also visible in post-listing performance. Several recent issues have either delivered muted gains or been listed at a discount. This is a massive shift from the “listing pop” trend that dominated 2024–25.

Puravankara noted that investor behaviour is changing, “The ‘IPO gold rush’ that defined 2024 and 2025 was fuelled by abundant liquidity and aggressive growth narratives, but the market is now clearly encountering a valuation wall.”

“Recent listings show that investors are already pushing back. The Omnitech Engineering IPO, priced at ₹227, debuted at around ₹202 on the NSE, an 11% discount, despite being fully subscribed, reflecting clear resistance to aggressive pricing.”

He added that the market is moving towards fundamentals-driven investing, “The IPO market isn’t closing, but it is clearly maturing, where pricing discipline rather than hype will determine successful listings.”

A key concern for investors has been the high proportion of Offer for Sale (OFS) issues in FY25, where promoters dilute stakes instead of companies raising fresh capital for growth. This has led to increased scrutiny of valuations and business fundamentals.

Macro Pressures

Global factors are also shaping investor sentiment. Rising crude oil prices and geopolitical tensions are adding uncertainty to markets. Economists warn that sustained high oil prices could affect growth, inflation, and capital flows.

Prof. V.P. Singh, Director (PGPM) and Professor of Economics at Great Lakes, Gurgaon, said global developments are influencing investor behaviour. “Investors are driven by real value proposition as well as behavioural bias. Quite often, ‘select highlighted data’ takes over rational thinking. War situations are one of such ‘highlighted data’ that tends to sway the investor's interest from rational thinking.”

He added that while India’s fundamentals remain relatively strong, external risks persist. “Closure of the Strait of Hormuz has led to oil prices rising, and that can impact India’s GDP growth. The IMF estimates a contraction of 0.1%–0.2% in GDP growth if oil prices remain elevated by $10 per barrel for one year.”

According to him, the trajectory will depend on how long the disruption lasts. “In Scenario A, the valuations will bounce back soon, while in Scenario B, the low valuations will stay for a longer term. Elevated oil prices for a longer term imply higher inflation globally. If the US raises interest rates to quell inflation, an exodus of foreign investors will be seen, and valuations will stay low.”

Analysts believe the current slowdown shows a transition rather than a downturn. IPO activity remains active, but investors are becoming more selective. They are focusing on earnings visibility and reasonable pricing instead of momentum-driven bets.

A moderation in valuations, which is estimated at around 10–20% for some issuers, may be required to revive stronger demand, particularly in the mid-cap segment.

For now, the market appears to be moving from a liquidity-driven phase to a more disciplined cycle, where capital, largely domestic, is still available, but not at any price.