The Indian stock markets have been trading within a narrow range over the past year, despite several fiscal and monetary measures aimed at bolstering growth.
The domestic benchmark indices, Nifty 50 and Sensex, have faced substantial pressure, grappling with significant volatility.
Contributing factors to the Indian market’s underperformance compared to key global markets since September 2024 include sharp selling by foreign institutional investors (FIIs), geopolitical headwinds, and a weak rupee (INR).
One interesting trend observed is that, with muted returns in the secondary market, investors have increasingly turned their attention to the primary market. According to data from the NSDL, Foreign Portfolio Investors (FPIs) have made significant purchases in the primary market, amounting to ₹44,603.12 crore. In contrast, they have sold off a much larger sum of ₹202,964.33 crore in the secondary market.
This notable disparity highlights the shifting dynamics in investor behavior, with a clear preference for new issues despite the higher level of selling activity in established stocks.
“IPOs are delivering decent gains of 10-15% ROI. This shift in activity has contributed to the Sensex and Nifty 50 remaining range-bound, as the broader market lacks strong near-term triggers,” said Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd added that even foreign institutional investors (FIIs), who have been big sellers through the exchanges this year, have been consistent investors in the primary market. Mutual funds also are flush with funds and are investing in good quality issues.
In 2025, the IPO market initially showed sluggishness but has notably picked up momentum, particularly in September. On the mainboard, there have been 73 IPOs, while the Small and Medium Enterprises (SME) segment has seen 198 IPOs so far. Tata Capital and WeWork have successfully launched their IPOs this week, and investors are eagerly anticipating upcoming ones such as LG Electronics India, Rubicon Research, and Canara Robeco Asset Management Co, along with a host of other SME IPOs on the horizon.
Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund, said that the primary market’s exuberance reflects confidence in India’s growth story, but it’s also temporarily diverting liquidity from listed equities. With multiple IPOs crowding the pipeline, even robust domestic flows are getting fragmented, leaving the Sensex and Nifty 50 rangebound despite healthy fundamentals.
Key reasons for FPI inflows and outflows
Vipul Bhowar, Senior Director, Head of Equities, Waterfield Advisors, said that it is noteworthy that investors continue to engage in the primary market, thereby increasing their allocations to new sectors and emerging themes, which reflects a commitment to identifying potential growth opportunities.
Bhowar noted that the recent quarters have been characterised by sluggish growth in corporate earnings, compounded by geopolitical risks and ongoing trade tensions, particularly in relation to the United States.
Furthermore, elevated equity valuations in India when compared to other emerging markets have triggered profit booking and capital reallocation, culminating in the third consecutive month of net selling within the Indian stock market.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, noted that sustained selling by FPIs continued in September, with sales through exchanges reaching ₹27,163 crore.
However, in line with the long-term trend of buying in the primary market, FIIs purchased equities worth ₹3,278 crore during the same month. This selling in September brings the total FII sales for 2025 to ₹198,103 crore. When combined with the ₹121,210 crore sold in 2024, the total FII selling over the last 21 months amounts to a substantial ₹319,313 crore.
Market Outlook
Experts suggest that the upcoming Q2 business updates and corporate earnings could act as crucial catalysts to revitalise momentum in index-heavy stocks. Furthermore, any unforeseen positive developments from the ongoing US-India tariff discussions may add additional fuel or volatility to the market.
Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund, believes that equities have emerged as the sole viable option for surplus household savings, positioning them as an attractive investment avenue amid current market conditions.
Gulati explained that beneath the surface, domestic households are becoming the key market stabilizers. With gold and real estate at record highs – both acting as large liquidity sinks – and fixed deposit yields still unattractive in real terms, equities have emerged as the only viable avenue for surplus household savings. This steady retail participation has kept market sentiment anchored even amid global volatility.
According to Mohit Gulati, macros remain largely supportive. GST collections are strong, credit growth is healthy, and government capex continues to drive momentum. That said, global crude prices, rural demand uncertainty, and persistent FII outflows remain overhangs. The next trigger may come from an earnings-led rally supported by festive season consumption. Softer inflation, GST cuts, and buoyant consumer sentiment could well provide the spark the secondary market has been waiting for.
Further, Dr. V.K. Vijayakumar, added that the range bound movement of the Nifty 50 and Sensex are due to the elevated valuations and the concerns arising out of the India-US trade tensions. Earnings are set to grow by around 15% in FY27, and this can pave the way for a mild rally in the market.