Blitz Bureau
NEW DELHI: India’s equity markets are undergoing a decisive transformation. For decades, foreign portfolio investors dictated the tone of public offerings in the country, but today domestic institutional investors — mutual funds, insurers, and banks —have emerged as the true anchors of India’s booming initial public offer (IPO) pipeline. This shift is visible not only in IPO anchor allocations but also in broader market ownership.
According to Prime Database, the shareholding of domestic institutional investors in NSE-listed companies reached a record 17.82 per cent in June 2025, overtaking the 17.04 per cent held by foreign investors, their lowest level in 13 years. The symbolic crossover, first seen in March 2025, has only widened with each passing quarter.
Anchor allocations
In IPO anchor placements, which are critical for gauging demand and stabilising prices, domestic institutions have steadily expanded their influence. In 2019, foreign investors contributed ₹2,624 crore, while domestic institutions trailed at ₹1,475 crore. By 2021, foreign allocations surged to ₹29,030 crore, but Indian institutions narrowed the gap with ₹16,433 crore.
The real reversal came in 2022, when foreign anchor investments slumped to ₹7,105 crore, while domestic investors stepped up with ₹10,903 crore. By 2024, the divergence had become more pronounced, with foreign investors subscribing ₹26,122 crore against ₹29,254 crore from domestic players.
The pattern has persisted into 2025. By 7 August this year, of the ₹1,61,499 crore raised through IPOs, foreign investors accounted for ₹48,913 crore, while domestic institutions poured in a commanding ₹1,03,306 crore. Mutual funds alone contributed ₹7,920 crore, underscoring the firepower of local liquidity.
Retail money and SIP flows
Fueling this shift is a wave of household savings channelled into equity markets through mutual funds. July 2025 saw equity fund inflows hit an all-time high of ₹42,702 crore, an 81 per cent month-on-month jump. At the same time, systematic investment plan contributions reached a record ₹28,464 crore, with 91.1 million active SIP accounts, marking the 53rd consecutive month of net inflows.
This steady stream of retail money contrasts sharply with the behaviour of foreign investors, who remain skittish. Between October 2024 and July 2025, FPIs sold shares worth $31 billion, or ₹2.7 trillion, in India. In the same period, domestic institutions absorbed the selling pressure by purchasing shares worth ₹6.65 trillion. In July alone, FPIs pulled $2 billion from equities even as Indian mutual funds posted record buying.
Regulatory tailwinds
The structural tilt towards domestic capital is now being reinforced by regulatory change. On 31 July 2025, the Securities and Exchange Board of India (Sebi) proposed sweeping reforms in anchor and retail allocations for mega IPOs above ₹5,000 crore.
The regulator suggested reducing the retail quota from 35 per cent to 25 per cent, while raising the QIB participation from 50 per cent to 60 per cent. It has also proposed expanding the number of anchor allottees and reserving 40 per cent of anchor allocations for long-term domestic investors, including mutual funds, insurers, and pension funds.
Of this, 7 per cent will be specifically earmarked for life insurers and pension funds, while one-third will remain reserved for mutual funds. If implemented, these reforms would institutionalise the trend already visible in the market, where domestic investors — not foreign capital — set the benchmark for pricing and demand in new listings.
India climbs global rankings
The rising domestic bid has coincided with a surge in deal-making. In the first half of 2025, India recorded 119 IPOs across mainboard and SME platforms, raising ₹51,150 crore. This marked a sharp increase from ₹37,682 crore across 157 IPOs during the same period in 2024, lifting India to fourth place globally by IPO proceeds.
Bankers say issuers are increasingly drawing comfort from domestic depth. “DIIs are now leading price-setting in IPOs,” said Arvind Vashistha, Head of Equity Capital Markets at Citi India. “Given the steady inflows into mutual funds, issuers can size and price their offerings with confidence.”
Structural, not cyclical shift
Experts emphasise that this is not a temporary anomaly. “Mutual funds’ ability to deploy large, regular inflows gives them a structural advantage over FPIs, whichthe chase limited supply in listed stocks,” observed Prakash Bulusu, Joint Chief Executive of IIFL Capital Services. Pranav Haldea of Prime Database added that the growing dominance of domestic institutions in IPO anchor books represents a structural shift rather than a cyclical blip.
With foreign investors increasingly selective and global volatility persisting, India’s IPO market is being redefined by the strength of its own savings. Robust SIP flows, a maturing insurance and pension ecosystem, and Sebi’s regulatory alignment are ensuring that the IPO playbook is no longer written in foreign capitals but within the financial households of India itself. The country’s equity story is increasingly being shaped, driven, and anchored by its own people.