Robust IPO Rally Defies Correction: India's Growth Story Nears Key Valuation Trough

Robust IPO Rally Defies Correction: India's Growth Story Nears Key Valuation Trough​

India’s primary market demonstrated remarkable resilience in FY26, with the Initial Public Offering (IPO) segment raising an impressive Rs 2,01,442 crore through 153 listings. This sustained listing activity occurred even as broader equity markets underwent a noticeable correction, according to a new market report. The robust performance signals continued strong investor appetite and deep confidence in the country’s long-term growth narrative.

Macroeconomic Pillars Fueling Market Resilience​

The underlying macroeconomic fundamentals remain highly resilient, providing a solid bedrock for the market. Real GDP growth is projected to expand steadily at around 6.5 per cent for the fiscal years FY26–FY27. Furthermore, the nominal GDP is expected to witness significant expansion, increasing by 10–11 per cent.

Government-led infrastructure spending is set to remain a critical catalyst. Capital expenditure is anticipated to account for nearly one-third of the total expenditure in FY27. The macro stability is further underpinned by inflation, which is expected to remain under control at approximately 4.5 per cent, alongside a managed fiscal deficit target of 4.3 per cent.

External Pressures and Valuation Attractiveness​

Despite the positive domestic indicators, the market must navigate persistent external pressures. The Indian rupee continues to face strain, attributed to weaker Foreign Direct Investment (FDI) inflows and consistent Foreign Portfolio Investor (FPI) outflows. This vulnerability is compounded by a widening trade deficit, contributing to an ongoing depreciation trend that began in 2022.

However, the report notes that benchmark indices are moving closer to historically attractive levels. Valuations, particularly in the midcap and small-cap segments, have seen necessary corrections. While these segments remain elevated compared to their long-term averages, the cooling valuations suggest approaching attractive levels for investors.

Corporate Earnings and Sectoral Divergence​

Overall corporate earnings are expected to grow by approximately 10 per cent, although this expansion is set to be uneven across various industries. Certain sectors are poised for gradual improvement, including Banks, consumer discretionary, metals, and telecom.

Conversely, the energy sector is flagged as an area that may face some pressure during this period. This expected variation highlights the need for selective investing, focusing on sectors benefiting directly from consumption growth and governmental spending cycles.

Retail Participation Remains Key Growth Engine​

Retail participation continues to be a key pillar supporting market liquidity and momentum. The depth of participation is evident in the surging number of demat accounts, which have now crossed 222 million. Active equity traders surpassed 1.48 crore by February 2026, indicating broad retail engagement.

Furthermore, systematic investment plan (SIP) inflows into mutual funds have maintained a robust trajectory, consistently exceeding Rs 30,000 crore annually. This commitment from retail investors underpins confidence even during periods of broader market volatility.