Why India's IPO market should perform well in FY26
What's the story
India's initial public offering (IPO) market is poised for a strong revival in FY26. The health of the IPO market is critical to the overall capital market ecosystem, as it provides investors with a range of investment opportunities and companies with risk capital. However, its strength is closely linked to broader market sentiment. Bullish phases in secondary markets often lead to increased IPO activity, while bearish trends can slow down public offerings.
Growth outlook
Signs of recovery are already visible
The Indian equity markets remained bullish until September 2024, resulting in a record number of public issues. However, weakening macroeconomic environment in Q2 FY25, led to lull in public market activity. Despite this, the market is showing signs of recovery with improving growth prospects. This indicates that March-May 2025 could have been the trough for IPO activity. If broader market continues to rise, we can expect an uptick in IPO market similar to the robust activity seen between April-September 2024.
Positive sentiment
Management commentary turns positive ahead of FY26
The management commentary from listed firms has turned increasingly positive going into FY26 and FY27. This is backed by improving global macroeconomic conditions, expected geopolitical stability, and government-led CAPEX initiatives like massive investments in infrastructure. The FY26 Union Budget's income tax cuts are tipped to inject nearly ₹1 lakh crore into the economy, stimulating household consumption. These fiscal measures are paving the way for India's next growth phase.
Monetary easing
RBI's rate cuts are creating a positive environment
The Reserve Bank of India (RBI) has taken proactive steps to support growth, including repo rate cuts totaling 100bps since February 2025, and CRR reductions of 150bps. These measures are aimed at improving credit flow across the economy. If inflation remains in check, there is space for further rate cuts, thus creating a conducive environment for economic expansion and greater IPO market activity.
Investor confidence
Companies are already gearing up for IPOs
Despite 18% correction from its September 2024 peak, SIP inflows into mutual funds have remained strong. This commitment to disciplined investing underscores confidence of Indian households in long-term equity growth. To capitalize on the positive sentiment and robust liquidity, many companies are preparing to launch public issues in FY26. A total of 72 IPOs already approved by SEBI are tipped to raise nearly ₹1.4 lakh crore, with another 68 pending approval with an estimated fundraising potential of ₹1 lakh crore.