Indian markets haven’t been outliers in comparison with their Asian or world friends. The markets are just some proportion factors away from their all-time highs, however the momentum for a sustained rally seems to be lacking.
Within the final two quarters, fund flows — each home and international — have primarily chased new share issuances relatively than shopping for within the open market. This lack of demand within the secondary market has saved costs transferring sideways.
Two key liquidity swimming pools drive and maintain the markets:
1. Retail cash — each direct fairness investments and mutual funds.
2. Overseas flows — pushed largely by a rise in recent market free float.
The benchmark indices have barely delivered returns over the previous 12 months. Regardless of this, retail traders have continued to take a position, although the tempo has slowed. Direct retail flows into fairness markets declined within the first two months of the present fiscal yr as a consequence of a drop in younger traders, slower IPO exercise, and unstable markets triggered by commerce tariffs, geopolitical tensions between India and Pakistan in April–Could, and the Israel–Iran battle in June.
In keeping with the Nationwide Inventory Change, younger traders have dominated retail participation, though their share has declined over the previous yr.
The share of registered traders underneath 30 years of age fell from 40% in March 2024 to 39.5% in March 2025 and additional to 39.2% in Could 2025, in line with NSE Market Pulse. The drop may be attributed to a decline within the share of latest traders underneath 30 — from 58.8% in FY24 to 53.2% in FY25 — although this rebounded to 56.1% within the first two months of FY26.
Gross flows into mutual funds have additionally dipped throughout this era. Nevertheless, disciplined traders have continued with their SIPs (systematic funding plans), and inflows via SIPs stay at an all-time excessive.
Retail traders have largely paused lump-sum investments in mutual funds and direct equities, which is obvious from the gradual, sideways motion in benchmark indices and the declining common day by day turnover. The common day by day turnover has dropped within the final quarter throughout the money section and fairness derivatives.
In the meantime, flows are chasing choose sectors for returns. Defence has been the most important beneficiary, with the sectoral index up 37.45% within the first quarter of this yr, adopted by Nifty Media, Nifty Small Cap, Nifty Realty, and Nifty Midcap 100. FMCG, Pharma, and IT sectors have seen the least good points and even outflows throughout this era.
The second key issue is international investor flows. Whereas international flows have been unfavorable for the present calendar yr and over the previous yr, that’s solely half the image — they’ve turned optimistic over the past three months. A better look reveals that international traders have been pouring cash into free-float-generating issuances, similar to QIPs, promoter fairness gross sales, PE exits, and IPOs.
A latest Jefferies report helps this pattern, noting that promoter and PE exits accounted for 75% of the availability, whereas QIPs and IPOs accounted for the remaining 25%. The market noticed $27 billion of latest issuances simply within the first quarter of the present fiscal yr.
So, if markets and firms are richly valued, why is there demand for these recent and secondary choices?
The reply is easy — the pricing of those points is honest and provided at a slight low cost to prevailing market costs. Furthermore, these issuances are structured so they don’t disrupt secondary market demand and provide. Most are carried out via separate buying and selling home windows, thereby avoiding direct impression on the common market.
By being provided at a reduction, these shares permit traders to amass stakes with out driving up market costs, that are already at premium valuations. IPO pricing has additionally been extra affordable, with out steep itemizing premiums, as latest listings present.
These choices have one other vital impression: India’s total free float has elevated over the previous few quarters. With $27 billion raised in only one quarter, India’s free float in world indices has risen, boosting its weight in world rising market benchmarks — and driving additional international flows.
It’s estimated that recent fairness price $65–80 billion is predicted to hit the market within the present monetary yr, together with over $5 billion from public sector corporations to fulfill divestment targets. These new points are prone to be absorbed by international and home traders alike.
The regular provide of recent paper ought to guarantee continued liquidity from international funds benchmarked to world indices. Moreover, midcap and small-cap shares stand to profit as improved liquidity and better market capitalisation make them extra accessible to massive institutional traders.
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