Why are FIIs selling stocks but queuing up for IPOs?

FIIs are trimming secondary market exposure because valuations look rich, US real yields are high and the dollar is strong, so risk reward in crowded large caps feels tight. And domestic flows from DIIs keep indices steady, so FIIs can book profits without breaking price. So they prefer selective primary deals where pricing and liquidity offer cleaner entry points.​

FIIs have withdrawn about ₹2 lakh crore from the secondary market in 2025, while primary participation has stayed active but more selective than last year. Roughly ₹54,000 crore of FII money is estimated to have gone into IPOs in 2025 so far, down about 55 percent versus 2024 as pricing got tighter and alternatives improved. Monthly prints show the same pattern: October saw IPO‑led inflows, but excluding IPOs FIIs remained net sellers in cash equities.​

This is also about the entry and exit pathway. FIIs often enter through IPOs using QIB and anchor buckets for assured allocation and disclosures, and later rebalance or exit through the secondary market when macros or valuations shift. NSDL and exchange datasets separate “stock exchange” flows from “primary and others”, showing primary inflows alongside secondary selling on several days. So the practical route is enter in primary for price and liquidity, and exit in secondary for flexibility when conditions change.