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Mutual Funds Pivot to IPOs as Secondary Market Lags
17 Nov
Summary
- Mutual fund investments in IPOs up 38% in 10 months
- Mutual funds now account for 20% of total IPO money raised
- Experts cite lack of compelling opportunities in secondary market
As of November 17, 2025, India's mutual funds have been actively investing in initial public offerings (IPOs) in search of better returns, as the secondary market continues to struggle with high valuations. In the 10 months leading up to the current date, mutual fund investments in IPOs have jumped 38% to ₹25,966 crore, compared to the same period last year.
This increased participation has seen mutual funds account for 20% of the total money raised through IPOs, up from 18% a year ago. In contrast, other institutional investors, such as foreign portfolio investors and insurance companies, have seen their IPO participation decline or remain muted over the same period.
Experts attribute this trend to the mutual funds' need to deploy the steady inflow of retail money, as well as the lack of compelling opportunities in the secondary market, where valuations remain expensive. With the Nifty 50 index still not having reached its September 2024 high, mutual funds are turning to the primary market in search of better returns.
However, some industry observers have raised concerns about mutual funds investing in IPOs with lofty valuations, such as the recent Lenskart IPO, which was priced at 260 times its valuation. While mutual funds argue that they are investing for the long term, an analysis of their holdings in the top five IPOs they participated in shows that a significant number of them have already exited their positions, suggesting a more short-term approach.
