Archive · 17 Nov 2025
Mutual Funds Boost IPO Investments Amidst Sluggish Secondary Market
Mutual funds, which manage money for many people, are investing more in something called IPOs.
This is like when a new store opens and people go to check it out.
The reason is that the usual places they invest, like the stock market, are too expensive or not giving good returns.
Other big investors, like those from foreign countries, are being more careful and not investing as much in these IPOs because they think India's market is too expensive right now.
Mutual funds increased IPO investments by 38% to ₹25,966 crore in the first 10 months of the fiscal year.
Their share in total IPO money rose to 20%, while FPIs and insurance companies' shares decreased or remained muted.
Mutual funds seek better returns in IPOs due to limited opportunities and high valuations in the secondary market.
Other institutional investors, like FPIs, are cautious due to expensive valuations and moderating earnings growth in India.
Some mutual funds exit IPO investments early, questioning high valuations and long-term commitment.
- Who
- Indian Mutual Funds, Foreign Portfolio Investors (FPIs), Insurance Companies, Financial Institutions, Banks, Alternative Investment Funds (AIFs), Venture Capital Funds, Companies seeking IPOs, Retail Investors
- What
- Mutual funds are increasing their investments in Initial Public Offerings (IPOs) due to limited opportunities and high valuations in the secondary market, while other institutional investors are showing caution.
- When
- Over the 10 months ending October of the current fiscal year.
- Where
- India
- Why
- Mutual funds are deploying robust retail inflows into IPOs seeking better returns as the secondary market is perceived as overvalued and sluggish. Conversely, other institutional investors are cautious due to expensive valuations and moderating earnings growth in India.
Arguments for Investing in IPOs
Arguments Against or Cautionary Views on IPO Investing
Deployment of Retail Inflows
Arguments for Investing in IPOs
Mutual funds need to deploy the steady inflow of retail money and see IPOs as a way to generate better returns when secondary market opportunities are scarce or overvalued.
Arguments Against or Cautionary Views on IPO Investing
Some fund managers avoid IPOs, believing most leave little long-term profit potential for equity investors. There's also a concern about deploying large inflows without impacting market prices.
Fear of Missing Out (FOMO) and Media Influence
Arguments for Investing in IPOs
Fund managers feel compelled to invest in IPOs, fearing they will miss out on potential upside if the stock performs well, especially given media attention and aggressive pitching by investment bankers.
Arguments Against or Cautionary Views on IPO Investing
The decision to invest is sometimes influenced by behavioral biases and recency bias towards IPOs, rather than purely fundamental analysis. Additionally, some funds exit investments early, questioning the long-term commitment.
Market Conditions
Arguments for Investing in IPOs
IPOs are seen as a function of a bull market; as markets rise, promoters are more comfortable with richer valuations, and expensive secondary markets push fund managers towards primary issues for alpha.
Arguments Against or Cautionary Views on IPO Investing
Foreign investors are cautious due to expensive valuations in India (higher P/E ratio compared to China) and moderating earnings growth, leading them to stay away from primary markets.
- Mutual Fund Investment in IPOs (Jan-Oct)
- ₹25,966 crore
- YoY Growth in MF IPO Investment
- 38%
- MF Share in Total IPO Money Raised
- 20%
- FPI Share in Total IPO Money Raised
- 26%
- Insurance Companies Share in Total IPO Money Raised
- 4%
- Total Money Raised via IPOs (Jan-Oct)
- ₹1.3 trillion
- Net Flows in Equity Schemes (Current Year)
- ₹2.91 trillion
- Nifty 50 Return (Jan-Oct)
- ~8%
