Newspaper Summary - 141225

 Foreign Portfolio Investor (FPI) activity in 2025 was characterized by heavy and sustained selling in Indian financial markets, making it one of the toughest years for foreign participation in nearly two decades.

FPI Activity in 2025: Relentless Selling

FPIs were relentless sellers of Indian equities throughout 2025. This selling reached historical levels:

• Net Sell Days: FIIs were net sellers on 141 out of 234 trading days during the calendar year, a tally projected to be the second-highest number of net sell days in two decades, second only to the 154 sell days recorded during the 2008 global financial crisis.
• Scale of Outflows: Until December 12, 2025, net FPI outflows swelled to ₹1,52,273 crore, translating to roughly ₹110 crore exiting the market every trading hour.
• Global Context: Globally, India emerged as the second-most sold equity market in 2025 so far, experiencing net foreign outflows of $17.8 billion, second only to Canada ($24.9 billion).

Selling pressure intensified in December, with FPIs withdrawing ₹12,941.34 crore from the Indian market during the week ending December 12, covering both equities (₹6,135.33 crore) and debt (₹6,891.47 crore). The most pronounced selling in a single day that week occurred on December 10, when FPIs pulled out ₹5,386.69 crore.

Drivers of FPI Selling

The significant FPI exodus was attributed to a confluence of global and local factors:

1. Valuation Concerns: High valuations in Indian markets relative to global peers continued to weigh on sentiment for over a year. India's rich domestic equity valuations made the market less attractive compared to other emerging markets offering better value.
2. Global Rotation: A defining theme of 2025 was the reallocation of capital toward markets offering clearer earnings visibility and more attractive relative valuations. This led to incremental flows moving towards selected stocks in Korea and Taiwan (particularly those linked to AI and semiconductors), along with a revival in China.
3. Macro Uncertainty: Global risk appetite remained uneven due to uncertainty surrounding US bond yields and the future policy path.
4. Currency Weakness: Intermittent rupee weakness added to FPI caution. The sharp depreciation of the rupee (trading between ₹89.88 and ₹90.37 per US dollar in the week ending December 12) eroded dollar-based returns, further dampening foreign investor sentiment.

Key Trends and Market Resilience

Despite the sustained FPI outflows, the overall market impact was far milder than in past episodes of foreign exodus, primarily due to the strength of domestic flows.

• Domestic Institutional Investor (DII) Offset: Domestic institutional investors (DIIs) more than offset the selling pressure, buying a record ₹7,20,651 crore in 2025 so far. DII buying equated to nearly ₹510 crore every trading hour, and DIIs did not record a single net-sell month.
• Reduced Foreign Dependence: This unprecedented surge in domestic flows, driven by mutual fund SIPs, insurance inflows, and pension allocations, significantly reduced India’s dependence on foreign capital during the year.
• Sectoral Divergence: Market performance showed a divergence. While the Nifty Smallcap 250 slipped 7% and mid-caps gained about 5%, large-caps (Nifty 100 Total Return Index) held up relatively well, delivering close to 10% year-to-date returns.
• FPI Sectoral Preference: Although FPIs were net sellers overall, their investment values increased in three sectors: Telecom (79%), Services (46%), and Oil, Gas & Consumable Fuels (28%). Conversely, FPI holdings declined significantly in IT (-29%), Realty (-23%), and Consumer Durables (-21%).

2026 Outlook

Looking ahead to 2026, the prospect of FPI re-engagement hinges on key factors, although the Indian market is now structurally more resilient.

• Market Resilience (Structural Trend): The rise of DIIs as structurally dominant market players suggests that increasing domestic flows can increasingly cushion foreign exits, thereby enhancing overall market resilience.
• Conditions for FPI Re-engagement: For FPIs to return, re-engagement will depend on three critical conditions being met: consistent earnings delivery, currency stability, and whether the current global shift in emerging market leadership (favoring other markets) proves durable.

The reliance on domestic capital mirrors a broader shift within the country's corporate landscape, where large, disciplined business houses (conglomerates) are emerging as influential allocators of long-term capital, signaling that private capital has decisively overtaken State capital in shaping India's economic future.

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Analogy: The Indian market in 2025 acted like a ship weathering a foreign storm: although the strong winds of FPI selling attempted to push it backward (₹110 crore outflow per hour), the powerful domestic engines (DII buying at ₹510 crore per hour) kept the vessel moving forward, demonstrating its inherent stability and reduced reliance on external momentum.

The sources highlight the Domestic Institutional Investor (DII) activity in 2025 as a crucial counter-balance that insulated the Indian financial markets from severe downturns, despite massive and relentless selling by Foreign Portfolio Investors (FPIs). This structural shift is noted as a defining characteristic of the 2025 market and a key factor in the outlook for 2026.

DII Activity in 2025: The Key Stabilizer

DIIs played an exceptionally active and stabilizing role throughout 2025:

• Record Buying: DIIs achieved a record buying level of ₹7,20,651 crore in 2025 so far.
• Offsetting FPI Outflows: This unprecedented domestic buying more than offset the severe selling pressure exerted by FPIs. While FPI net outflows swelled to ₹1,52,273 crore (or about ₹110 crore exiting the market every trading hour), DII buying translated to nearly ₹510 crore of buying every trading hour.
• Consistency: DII activity was remarkably consistent, as they were net sellers on only 24 days and did not record a single net-sell month throughout 2025.

This sustained surge in domestic flows was largely driven by continued retail interest, particularly through mutual fund Systematic Investment Plans (SIPs), along with insurance inflows and pension allocations. SIP culture, specifically, saw steady growth, increasing from ₹25,000 crore to ₹29,000 crore invested every month over the past year.

Impact and Market Resilience

The robust domestic flow provided a significant cushion against foreign exits, leading to a much milder market impact compared to previous sustained FPI exodus episodes.

• Reduced Foreign Dependence: The strength of DII activity significantly reduced India’s dependence on foreign capital during 2025.
• Market Performance: The divergence in capital flow translated to differentiated market performance; large-caps held up relatively well (Nifty 100 Total Return Index delivered close to 10% year-to-date returns), whereas the Nifty Smallcap 250 slipped 7%.

Outlook for 2026: Structural Dominance

The sources view the rise of DIIs not merely as a cyclical event but as a fundamental, structural change in the market dynamics, offering a positive outlook for future resilience.

• Structural Dominance: The rise of DIIs as structurally dominant market players suggests that increasing domestic flows can increasingly cushion foreign exits, which enhances overall market resilience.
• Structural Shift: This trend mirrors a broader structural shift where private capital has decisively overtaken State capital as the principal architect of India’s economic future. Large, disciplined business houses are emerging as influential allocators of long-term capital, signaling enduring strength derived from internal forces.
• FPI Re-engagement Context: For Foreign Portfolio Investors to consider re-engagement in 2026, the key determinants remain consistent earnings delivery, currency stability, and the durability of the current shift in emerging market leadership. However, the foundational change provided by DIIs means the market is inherently more protected even if FPIs remain cautious.

In essence, the sources present DII activity in 2025 as the primary firewall protecting Indian equities, fundamentally altering the traditional vulnerability of the Indian market to foreign capital fluctuations, a resilience expected to continue influencing the market positively into 2026.

The sources depict the Indian financial market performance in 2025 as resilient, characterized by a fundamental shift towards domestic investor dominance, despite severe global headwinds and intense Foreign Portfolio Investor (FPI) selling. The outlook for 2026 suggests continued resilience but hinges on corporate performance and global financial stability.

Market Performance in 2025

The performance of the Indian markets in 2025 showcased remarkable resilience against significant external pressure:

• Mild Impact Despite Outflows: 2025 was one of the toughest years for foreign participation in nearly two decades, with FPI net outflows swelling to ₹1,52,273 crore (about ₹110 crore exiting the market every trading hour) by December 12. However, the market impact of this sustained exodus was "far milder than in past episodes" of sustained FPI selling.
• DII Counterbalance: This resilience was due to the record buying by Domestic Institutional Investors (DIIs), who bought ₹7,20,651 crore (nearly ₹510 crore every trading hour) and maintained consistency by not recording a single net-sell month. This surge in domestic flows significantly reduced India’s dependence on foreign capital.
• Sectoral Divergence: Market returns were not uniform across segments:
  • Large-caps (Nifty 100 Total Return Index) held up relatively well, delivering close to 10% year-to-date returns.
  • Mid-caps gained about 5%.
  • The Nifty Smallcap 250 slipped 7%.
• Recent Index Activity (December): The benchmark indices, Nifty 50 and Sensex, declined about 0.5% each in the week prior to December 14, 2025, but managed to bounce back sharply from their support levels, keeping the overall uptrend structure intact. Nifty Bank also showed a bullish bias, provided the 59,000 support holds.

Key Market Trends in 2025

The year was defined by several structural and behavioral trends:

1. DII Structural Dominance: The rise of DIIs, fueled by growing mutual fund SIPs (increasing to ₹29,000 crore invested every month), positioned them as structurally dominant market players capable of cushioning foreign exits.
2. IPO Market Mania and Deterioration: Despite the overall resilience of the broader market, the Initial Public Offering (IPO) market experienced "mania" and "fever". This period, spanning 2021-2025, showed diminishing returns and questionable quality:
   • Exit Route Dominance: Roughly two-thirds of the ₹5.4 lakh crore raised since 2021 came via Offers for Sale (OFS), meaning the funds primarily went to existing shareholders (promoters, VCs) rather than as fresh capital for the company.
   • Listing Performance Decline: The IPO market became precarious; for 2025, it was essentially a coin toss, with 50% of IPOs already trading below their issue price as of December 8, 2025. In fact, approximately one in four IPOs since 2021 could not even close above the issue price on listing day.
   • Post-Listing Weakness: The data showed that holding IPO stocks long-term was being systematically punished, as two-thirds of the recent cohorts (2024 and 2025) were worse off than those who sold on listing day. Furthermore, skipping the IPO proved advantageous, as the odds were high (roughly 75% for 2024 and 2025 cohorts) that the stock would trade below its issue price within two years.

Outlook for 2026 and Beyond

The sources point to a structurally strong Indian market, but FPI re-engagement remains conditional:

• Structural Resilience (Long-Term): The fundamental shift, where private capital has decisively overtaken State capital in driving economic future and the capacity of DIIs to buffer foreign selling, enhances the overall long-term market resilience.
• Conditions for FPI Return: For FPIs to re-engage substantially in 2026, three critical conditions must be met: consistent earnings delivery, currency stability, and determination of whether the current global shift in emerging market leadership (favoring other countries like Korea, Taiwan, and China) proves durable.
• Future IPO Pipeline: Despite the poor recent performance of IPOs, the pipeline for CY26 remains robust, with an estimated over ₹2-lakh-crore worth of issues expected, potentially including NSE, Reliance Jio, and Manipal Hospitals. This suggests that retail enthusiasm for IPOs is unlikely to fade.
• Conglomerate Capital Discipline: The emergence of disciplined business houses (conglomerates) focusing on capital discipline, reinvestment velocity, and long-term horizons is noted as a key driver for the next growth phase. This shift in private capital allocation is expected to define the market beyond the previous decade's focus on unicorns and venture-fueled disruption.

Ultimately, the market outlook suggests India is fundamentally stronger due to domestic flows, but short-to-medium- term returns will be shaped by the delivery of corporate earnings and the shifting global risk landscape.

The sources characterize the Indian Initial Public Offering (IPO) market between 2021 and 2025 as a period of intense activity often described as "mania" or "IPO fever," that generated massive mobilization of capital but showed deteriorating quality and poor post-listing performance, challenging the traditional purpose of public fundraising.

Key Trends and Data (2021-2025)

1. Dominance of Offer for Sale (OFS) as an Exit Route: The most significant trend noted by the sources is the pervasive use of IPOs primarily as an exit route for existing shareholders rather than as a tool to raise fresh capital for the company.

• Fund Mobilization: Since 2021, over ₹5.4 lakh crore has been raised through more than 340 mainboard IPOs, including over ₹1.5 lakh crore raised in 2025 so far. This volume raised in just five years surpassed the total money raised in the previous three decades.
• OFS Ratio: Approximately two-thirds (or 62.5%) of this capital mobilization came via Offers for Sale (OFS), amounting to about ₹3.38 lakh crore. This implies that for every ₹100 raised, roughly ₹63 went to existing shareholders (like promoters, VC funds, and early investors), while only ₹37 went to the company as fresh capital.
• Criticism: This dominance of OFS has been openly criticized by the Chief Economic Adviser as undermining "the spirit of public markets," shifting the purpose of the IPO from business funding to funds merely "changing hands".

2. Deteriorating Listing and Post-Listing Performance: Despite the frenzy, the performance of these IPOs, particularly in recent cohorts (2024 and 2025), demonstrated increasing risk for investors who held the shares.

• Listing Day Risk: Across 344 IPOs since 2021 (as of December 8, 2025), approximately 26% couldn’t even close above the issue price on listing day. In 2025 specifically, this worsened, with about one in three issues (32%) failing to hold the offer price until the closing bell.
• The "Coin Toss" Reality: For IPOs in 2025, investment was "basically a coin toss," with 50% of them already trading below their issue price as of early December. This showed a clear deterioration compared to 2021, where more than two-thirds of IPOs were above their issue price.
• Punishing Long-Term Holding: Holding the stock beyond the listing day proved to be systematically disadvantageous. For both the 2024 and 2025 cohorts, roughly two-thirds of IPOs were trading worse off than if the investor had simply sold at the listing-day close.
• Cheaper Entry Point Later (FOMO Risk): The most damaging statistic suggests that investors suffering from "IPO-FOMO" (Fear Of Missing Out) were heavily penalized. For the 2024 and 2025 cohorts, roughly 75% of the stocks hit an "all-time low" below the issue price within two years, indicating that skipping the IPO often provided a chance to buy the stock cheaper later.

3. Retail Investor Behavior: The "Three-Day Sport" Retail participation transformed IPOs into a "short-duration trade dressed up as a national festival". The typical retail strategy involved monitoring grey market chatter, watching subscription cues on day three, applying for one lot, and then selling immediately at the listing-day opening price if allotted ("sell at the opening tick around 10 am").

• Punting Pays: This transactional approach worked often enough initially to feel like a strategy (a roughly seven out of ten chance in earlier years). However, the "juice is thinning," with the average listing-open gain dropping sharply in 2025, suggesting that the expected "free lunch" has been reduced.
• Subscription as Due Diligence: Retail investors frequently outsourced their due diligence by treating high oversubscription rates as a proxy for quality. While high oversubscription reliably predicted excitement and a day-one pop, it was "much weaker at predicting whether the stock holds value".

Outlook for 2026: Continued Pipeline and Structural Shifts

Despite the poor returns and market warnings, the demand and issuance pipeline remain robust:

• Robust Pipeline: The IPO pipeline for Calendar Year 2026 (CY26) is estimated to be over ₹2-lakh-crore worth of issues, potentially including major listings such as NSE, Reliance Jio, and Manipal Hospitals. This suggests that "retail enthusiasm will not fade".
• New-Age IPOs: The segment of new-age businesses (SaaS, fintech, consumer internet, etc.) highlights the dispersion of outcomes, with a few outliers creating value (e.g., Eternal/Zomato, PB Fintech), while several others destroyed it (e.g., One 97, Ola). Many loss-making firms at IPO remained so in FY25, demanding high valuations based on "storytelling" rather than profits.
• Smarter Investor Focus: For the smart retail investor in 2026, the key lesson is to stop viewing "allotment" as the win and instead focus on "paying a price that still leaves room for reality," anticipating that the post-hype reality often leads to lower valuations.

Overall, the IPO market (2021-2025) was a speculative arena dominated by shareholder exits and retail frenzy, necessitating extreme caution for investors heading into 2026, where fundamental earnings delivery is expected to determine value.

The sources explicitly identify the current period in Indian financial markets, particularly leading into the 2026 outlook, as India’s "Berkshire moment," marked by the definitive rise and structural dominance of large, disciplined Indian conglomerates (large business houses).

The "Berkshire Moment" Defined

This term signifies a profound structural shift where market leadership and long-term economic direction transition from speculative or state-driven forces to a few highly disciplined, financially strong, and diversified private business groups.

The sources use mythology (Samudra Manthan) and historical financial parallels (Warren Buffett’s Berkshire Hathaway, East Asian keiretsu and chaebols) to underscore the significance of this consolidation, viewing it as the emergence of a "source of enduring strength" for the economy.

Key Characteristics of the Rise of Conglomerates

1. Structural Dominance and Capital Allocation: The core of this moment is the substantial scale and influence achieved by these business houses:

• Market Scale: The 20 largest Indian business houses, tracked by the NAFA’s conglomerate index (covering 162 listed companies), collectively command a market capitalization of ₹136.7 lakh crore.
• Twice the Size of PSUs: This massive valuation is nearly 29% of India’s listed market capitalization and is almost twice the size of the entire PSU universe.
• Private Capital Over State Capital: This demonstrates the most consequential insight: Private capital has decisively overtaken State capital as the principal architect of India’s economic future, recycling capital at a much faster pace.

2. Focus on Capital Discipline and Long-Term Horizons: If the previous decade rewarded venture-fueled disruption (unicorns and IPO exuberance), the period ahead will reward strict financial prudence:

• Financial Transformation: Over the last decade, these conglomerates have undergone a decisive financial transformation, cleaning up leverage and exiting non-core or peripheral businesses.
• New Reward System: The next phase will reward capital discipline, reinvestment velocity, and unwavering patience with a long-term horizon, traits afforded by their strong balance sheets.
• Shift in Focus: The focus is shifting away from "burn rates" and "monthly user numbers" (associated with new-age firms) towards balance sheets, heavy capital expenditure (capex), scale, and execution.

3. Engine for the Next Capex Cycle: The consolidation arrives just as India is poised to enter its most significant capex cycle in three decades (spanning infrastructure like expressways, renewable corridors, ports, and data centers).

• Diversified Growth Engines: These houses are equipped to steer long-arc investments across multiple growth areas simultaneously. Examples include the Tata group influencing EVs and semiconductors, Adani anchoring airports and green energy, and Reliance blending telecom, retail, and digital services into a single "reinvestment flywheel".
• Capex Performance: While capex (excluding financial services) among the top 20 conglomerates grew at an 11% CAGR over the past six years (FY19 to FY25), it significantly lagged their net profit CAGR of 19% in the same period. The "silver lining" is that their current balance sheets and firepower are significantly better today to drive future growth.

4. Market Valuation and Outlook (2026): The market is already signaling its confidence in this segment:

• Valuation Premium: Groups recognized for their judgment and capital discipline, such as Tata, Godrej, Wadia, and Hinduja, command richer valuation multiples.
• Future Dependence: For these rich valuations to hold into 2026, consistent and strong earnings growth based on strategic investments and opportunities will be necessary.

The "Berkshire moment" thus represents a foundational change in the Indian economy, where domestic, disciplined conglomerate capital is seen as the quiet force of allocators that will define the country's next growth chapter, ensuring greater market stability against external shocks like FPI selling.

The sources detail a variety of key financial concepts and instruments, ranging from complex derivative tools used by fund managers to crucial return metrics and basic IPO mechanics, all operating within the shifting context of the Indian financial markets (2025/2026 Outlook).

1. Investment Vehicles and Capital Flows

The primary instruments channeling domestic savings into the market are robust and growing, counterbalancing significant FPI outflows in 2025.

• Systematic Investment Plans (SIPs): SIP inflows into mutual funds have continued their steady growth, rising from ₹25,000 crore to ₹29,000 crore invested every month over the past year. This sustained flow is the core driver behind the record buying activity by Domestic Institutional Investors (DIIs) that underpinned market resilience in 2025.
• Mutual Funds (MFs): Mutual funds cover diverse categories, such as Equity Funds (Large Cap, Mid Cap, Small Cap, Flexi Cap, Focused, Value, ELSS, and various thematic/sectoral funds) and Hybrid Funds (Aggressive Hybrid and Balanced Advantage Funds).
• Passive Instruments (ETFs/Index Funds): The market offers a wide array of passive funds tracking benchmarks like the Nifty 50, BSE Sensex, Nifty Midcap 100, and Nifty Smallcap 250, as well as specialized commodity ETFs (Gold and Silver).
• Debt Instruments: These include specialized mutual fund categories such as Ultra Short Duration, Low Duration, Money Market, Short Duration, Gilt Funds (which invest in government securities), and Corporate Bond Funds, catering to varying risk and duration profiles. Fixed Deposits (FDs) are also highlighted as a comparative savings instrument, with banks publishing current interest rates.

2. Advanced Return Measurement: XIRR

To accurately measure performance across the growing trend of retail investing via SIPs, specific metrics like XIRR are used, as traditional measures fall short.

• Limitations of Traditional Metrics: Compounded Annual Growth Rate (CAGR) measures returns between a single start point and endpoint and cannot account for interim cash flows like those from bonds or mutual fund withdrawals (SWP). Absolute Return (or holding period return) is even more limited as it fails to incorporate the time factor.
• IRR and XIRR: The Internal Rate of Return (IRR) provides a time-adjusted return measure. The Extended Internal Rate of Return (XIRR) is a more flexible function used when cash flows (like SIP investments or withdrawals) occur randomly rather than uniformly, which is typical for mutual fund investments.
• Yield to Maturity (YTM): In the context of fixed income securities, XIRR is often referred to as Yield to Maturity (YTM). XIRR assumes that any interim cash flows received (e.g., semi-annual interest payments from a bond) are reinvested until maturity at the rate equal to the calculated XIRR itself.

3. Derivatives, Risk Management, and Fund Strategy

Derivatives are crucial for sophisticated risk management and tactical asset allocation, particularly for hybrid schemes.

• Balanced Advantage Funds (BAFs): These funds employ derivatives to maintain flexibility. They deploy a large portion of assets (e.g., up to 80% gross equity allocation) into direct stocks, but adjust their net equity exposure (e.g., fluctuating between 30% and 80%) by using Nifty futures for hedging.
• Tax Efficiency and Cost: Managing exposure via derivatives (futures) is essential because selling actual stock holdings would forfeit favorable equity taxation benefits. Furthermore, adjusting exposure via futures transactions is dramatically cheaper (three to four basis points for a round-trip futures transaction) compared to transacting in cash equities (around 36 basis points).
• Option Greeks: In option trading (used for hedging or speculation), specific concepts known as "Greeks" measure sensitivity to various factors: Delta indicates how much the option price moves for a one-point move in the underlying asset; Gamma favors the long position when the underlying moves up; and Theta works against a long position as it represents time decay.
• Credit Risk Hedging: In the global debt market, instruments like Credit Default Swaps (CDS) are used by banks and investors to hedge exposure against a company’s debt default risk, as seen in the reaction to Oracle's data center delays.

4. IPO Mechanics and Fundamental Valuation

The sources highlight the difference between two key types of offerings in IPOs, a crucial point of risk for investors in the recent "IPO mania" (2021-2025).

• Offer for Sale (OFS) vs. Fresh Issue: An IPO can consist of a Fresh Issue (money goes into the company for growth) or an Offer for Sale (OFS), where funds are transferred to existing shareholders (promoters, private equity/VC funds). The prominence of OFS (roughly two-thirds of capital raised since 2021) suggests IPOs often function primarily as an exit route rather than a primary fund-raising tool, a trend openly criticized by official sources.
• Fundamental Valuation Metrics: Stock analysis relies on key concepts to gauge whether a price is reasonable: Price Earnings Ratio (P/E) measures the current market price relative to earnings per share; Price to Book value (P/BV) measures the price relative to book value or net worth, used especially for asset-heavy firms (like banks); Return on Capital Employed (ROCE) shows returns generated on capital used; and the Debt Equity Ratio (DER) indicates a company’s level of indebtedness.

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Key takeaway for the 2026 outlook: The reliance on sophisticated financial instruments like SIPs and derivatives (managed within funds like BAFs) demonstrates the increasing financial maturity and domestic self-sufficiency of the Indian market, making it structurally more resilient against the kind of foreign fund volatility seen in 2025.