India's 2025 IPO Party To Add Jitters To Already Volatile Stocks

The mania in India's primary market led by the action-packed initial public offerings is likely to bring a sentiment of déjà vu to their listed peers. Like the previous year, foreign investors could flock to these maiden issues, adding to the volatility stocks already face.

Foreign funds bought stocks worth $124 million, net of primary and secondary market in 2024. This included an inflow of $14.5 billion in primary market issues. However, they offloaded stocks worth $14.3 billion in secondary markets, triggering a slide in the latter part of the year.

So far in January, foreign institutions have been net sellers of $1.3 billion crore worth of Indian equities, according to National Securities Depository Ltd. While being net sellers in stocks, FIIs have already started loading up on primary issues with inflows of $1.7 billion.

The year has been volatile so far with the benchmark index falling five out of the eight sessions. The benchmark NSE Nifty 50 and BSE Sensex have fallen by 0.8% and 0.92%, respectively.

FIIs are sitting with huge cash in the portfolio after selling heavily in 2024 and will continue to do so, mainly due to the high valuations along with low earnings visibility, according to Prashanth Tapse, Sr. VP Research at Mehta Equities Ltd. "FIIs will continue to favour primary markets unless they are comfortable with valuation parameters and the Indian equity market outlook."

As of now, 28 companies with SEBI approval are planning to raise Rs 46,000 crore, including names like National Securities Depository Ltd., Ather Energy Ltd., etc. In addition, 79 companies are awaiting SEBI approval to raise Rs 1.3 lakh crore.

While the IPO party is yet to start full-fledged this year, the line-up so far points to a 2024-like record year. “Primary markets are essentially a function of the secondary market. With a broadly bullish sentiment in the secondary market through most of 2024, we are hopeful this will continue into 2025 as well,” Pranav Haldea, managing director of PRIME Database told NDTV Profit earlier.

In the short term, secondary markets would remain volatile due to many factors, Tapse said. Primary offers are giving healthy returns on the table which is attracting FIIs to play the game, he said. This is only till the opportunity exists, which is temporary.

Initial public offerings in 2024 saw the country’s biggest-ever listing, with Hyundai Motor Co.’s local unit raising Rs 27,870.1 crore. Food-delivery firm Swiggy Ltd. and NTPC Green Energy Ltd. topped Rs 10,000 crore.

The demand-supply scenario would continue to push the IPO market similar to the previous year, according to Tapse. "Long-term visibility is intact for primary markets and secondary markets will continue to remain volatile for short term."

However, analysts also point out that foreign investor participation will be "issue-to-issue" dependent.

2024 was a year of IPOs with a majority having performed well, according to Kranthi Bathini, director, equity strategy at WealthMills securities Pvt. The selective participation by global funds in maiden issues will depend on compelling business models, he said.

The strong trend observed the previous year is likely to continue into 2025, along with the frenzy among retail investors, Bathini said.

Analysts warn global markets are expected to continue seeing heightened volatility in the first half of the calendar year 2025 as the new US administration under Donald Trump is likely to implement significant policy changes.

“The first couple of quarters will contain more volatility, stemming from the change in US administration and its new policies,” Sanjay Mookim, head of research at JPMorgan India, told NDTV Profit.

Policies in the US government during the Trump presidency, trade policy, rate cut by the Federal Reserve and the direction of currency and oil prices will be the monitorables during the year.

Emerging market equities entered a correction after declining by more than 10% from a high in October, according to Bloomberg, indicating increased volatility that analysts have warned about.