With activity in the primary market rebounding in October and November, thanks to the Rs 15,154 crore Coal India issue, foreign institutional investors have chosen to channel their investments into new paper.

Overall, the primary market has been witnessed robust inflows from FIIs this year and cornered around 27% of equity market inflows. Of the total FII investment of $28.4 billion, about $7.7 billion have come into the primary markets, according to Sebi data.

Fund raising by way of initial public offerings (IPOs), follow-on public offerings (FPOs) and qualified institutional placements (QIPs) have totalled a record Rs 87,733 crore in the year till date, as per data from SMC Global Securities, beating the previous high of Rs 65,344 crore in calendar year 2007.

Industry observers believe that public issues such as Coal India are a great way for the FIIs to play the India game because of the high quality of the issue and reasonable valuations. ?Healthy FII participation is welcome, especially since the participation from the domestic institutional investors has been largely muted in the past few months,? said Saurabh Mukherjea, head of equities at Execution Noble.

Market participants estimate that at least Rs 25,000-30,000 crore worth of additional public issues will hit the market in FY11 and another Rs 5,000-10,000 crore will come from the private sector. ?The Coal India issue has already been a huge draw for the FIIs. And with a raft of PSU issues lined up this year, FIIs will continue to invest as long as the pricing is reasonable,? said Mukherjea.

Says Prithvi Haldea, MD of Prime Database, FIIs are always scouting for good investment opportunities, be it primary or secondary market. ?For investing in an IPO, FIIs primarily look at the issue size, company fundamentals and pricing.?

The trend has not affected liquidity in the secondary market this time around. ?I don?t think investment in the primary market has reached an alarming level,? said Ajay Parmar, head ? institutional equities, Emkay Global Financial Services. According to him, inflows in the primary market will be a cause for concern when it reaches 2-2.5% of the BSE market cap. At present, the figure is about 1%.