ETMarkets Smart Talk| India’s IPO boom far from over: $20 billion pipeline seen in 2026, explains Maulik Patel

Q) Thanks for taking the time out. What better way to start December, the last month of the year? We have already hit fresh record highs in November. Where are we headed?

A) As we step into December, the sentiment across Indian equities remains constructive, supported by macro stability, policy continuity, and a revival in earnings momentum.

After a fresh record high in November, markets are now entering a consolidation-with-upside phase rather than a runaway bull run.

The near-term direction will likely be range-bound with a positive bias, as valuations remain elevated but earnings growth for CY26/27 (expected at 17/14%) provides a solid cushion.

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Liquidity remains supportive – RBI’s easing stance, soft oil prices, and resilient domestic flows continue to anchor sentiment even as FIIs stay selective.

Over last 2 quarters, FIIs have increased their exposure to S. Korea/Taiwan market which are essentially part of AI value chain and India is relatively absence in AI story.

Q) Nifty rose by over 10% so far in 2025 to hit fresh record highs. However, individual portfolios are still not celebrating.
A) While the Nifty has rallied to fresh record highs, the broader market participation has been relatively narrow. The bulk of the gains have been driven by select heavyweights in sectors like Auto, BFSI, Oil & Gas, and Telecom, while mid and small-cap segments have seen under performance and intermittent corrections.

Large caps have better withheld these slowdown and have reported earnings growth of high single digit whereas small caps have struggled to deliver earning growth.

Many individual portfolios – typically more exposed to midcaps, smallcaps, or sector-specific bets – haven’t mirrored the headline index gains.

Additionally, valuation concerns in certain pockets, rotation between themes, and profit-taking after sharp rallies in 2024 have capped returns for retail investors.

Q) How are we placed from a valuation standpoint?
A) India’s valuations have eased from post CY24 peaks but remain above long-term averages. The Nifty trades near 20–21x forward earnings, slightly above its historical mean, supported by strong domestic flows and sign of earnings pick up.

India’s premium to emerging markets has narrowed as other Ems have rallied in last few months, making valuations more reasonable globally.

Across market caps, large caps remain relatively stable and supported by fundamentals, while midcaps trade at modest premiums backed by earnings momentum. Small caps, however, are highly stretched, with the small/large-cap P/E ratio (~1.25x vs. 0.9x LT average) signalling vulnerability to profit-taking or macro shocks.

Sector-wise, capital goods, consumer durables, and healthcare trade well above their 10-year averages, indicating optimism already priced in. In contrast, banking, oil & gas, and IT appear fairly valued and better positioned for risk-adjusted returns.

Q) FIIs were busy pulling out money from the secondary market while DIIs/retail investors were opening taps of SIPs. What could be the big trend in 2026?
A) In 2026, the big trend is expected to be a renewed alignment between earnings recovery and liquidity, led primarily by domestic investors.

With India’s monetary easing, falling inflation, and early signs of a credit revival, corporate earnings are projected to rebound 17/14% over CY26/27, shifting market focus from valuation to earnings delivery.

As FIIs reassess their underweight stance on India – especially once AI-led trades mature – incremental foreign flows could return from mid of 2026, attracted by stronger macro stability and normalized valuations.

Overall, 2026 may mark the beginning of an earnings-led upcycle, with domestic liquidity providing resilience and foreign participation potentially adding momentum.

The interplay of stronger profits, benign rates, and stable inflows could make 2026 a more balanced and broad-based market year.

Q) How is the IPO theme likely to play out in 2026? Any big names you are watching out for? FIIs have been steady buyers in the primary market space?
A) The IPO theme in 2026 is expected to remain strong, supported by a healthy pipeline, robust domestic liquidity, and a deepening investor base.

After a record run in 2025, the market is set for another active year with an estimated US$ 20 billion (Rs. 1.7–1.8 lakh crore) in potential fund-raising.

Improved macro stability, lower interest rates, and sustained retail participation through SIPs are likely to keep demand buoyant, while better quality and governance standards among issuers enhance investor confidence.
Some big names being closely watch out for include Reliance Jio, National Stock Exchange (NSE), PhonePe, Flipkart, OYO and SBI Mutual Fund – offerings that could attract global attention.

Interestingly, even as FIIs turned cautious in the secondary market, they have been steady buyers in primary issuances, preferring high-quality, scalable, and earnings-visible companies – indicating confidence in India’s long-term growth story.

Q) Which sectors or themes are likely to lead a rally in 2026?
A) In 2026, the market rally is likely to be earnings-led and domestically driven, with leadership shifting toward sectors benefiting from credit revival, consumption recovery, policy tailwinds and possible interest cut by US Fed.

As monetary easing supports growth and liquidity normalizes, banks and financials are expected to lead—riding on stronger credit demand, improved asset quality, and expanding NIMs.

Autos and FMCG should gain from rising rural incomes and sentiment recovery, aided by broad based revival in consumption. Meanwhile, oil & gas is benefiting from benign crude prices.

Commodity prices are at 2 year high and should get support in case of easing global liquidities.

Capital markets should gain from higher trading volumes and steady domestic inflows, while internet platforms are boosting from rising online consumption, and expanding fintech penetration.

Overall, 2026’s rally will be driven by financials, consumption, and select policy-linked cyclicals.

Q) What are your big learnings from the year 2025?
A) The year 2025 offered several key learnings. First, valuations matter — broader portfolios underperformed as earnings cuts and stretched mid/small-cap valuations caught up, proving that multiple expansion without earnings support is unsustainable.

Second, the year reaffirmed India’s structural shift toward domestic liquidity dominance. Even as FIIs pulled out money chasing AI-led opportunities, steady SIP inflows and rising DII ownership kept markets resilient.

Third, the year saw several popular themes — consumption revival, manufacturing and healthcare — but only those companies that converted themes into tangible earnings growth outperformed. Stock selection and execution discipline mattered more than top-down themes.

Q) With equity hitting fresh record highs, do you see a rub-off effect on Gold this time around?
A) Both gold and global equities are hovering near record highs, a rare occurrence that highlights a mix of optimism and caution among investors. Typically, rising equities reflect confidence in growth and earnings, while gold signals a preference for safety and hedging against uncertainty. Typically, gold performs well in rising inflation but this time its more driven by safety as central banks are reducing their exposure to US treasuries and parking incremental inflow in precious metal.

Much like “spinning two plates,” sustaining this delicate balance will depend on how smoothly earnings momentum continues and how global macro risks evolve in 2026. However, with valuations normalising, liquidity improving, and growth prospects brightening, equities are likely to outperform gold, as the latter faces limited upside amid stable inflation and easing global uncertainties.

Q) If someone wants to create a portfolio of say Rs 10 lakh in 2026, what should be the ideal portfolio allocation given he/she is in the age bracket of 30-40 years?
A) For an investor aged 30–40 years with a medium-to-long-term horizon, 2026 offers a favourable setup for an equity-biased but balanced portfolio, as the market is shifting toward earnings-led growth amid macro stability and easing rates. Given moderate risk tolerance, an ideal allocation for a Rs 10 lakh portfolio could be:
• Equity: 65–70% – Core holding driven by India’s domestic growth story.
o Large Caps: 35% – Stability through blue-chip names in banks, autos, oil & gas, and FMCG. Prefer Nifty 50/Nifty 100 ETF
o Mid Caps: 25% – Selective exposure to manufacturing, capital markets, and digital platforms for higher growth. Prefer midcap ETF
o Small Caps: 10% – Only quality, earnings-backed names.
• Debt: 20–25% – Invest in short-to-medium duration funds or high-quality bonds to balance volatility and benefit from lower interest rates.
• Gold: 5–10% – Acts as a hedge against global uncertainty and inflation, though upside looks limited versus equities.
• Cash/Liquid Funds: 5% – To take advantage of market corrections or new opportunities.

Overall, 2026 favours a growth-oriented, equity-heavy portfolio, with equities expected to outperform gold and fixed income, supported by earnings revival, strong domestic flows, and policy stability.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)