Mumbai, India – October 6, 2026 – Despite persistent weakness in the secondary market, India's primary market for Initial Public Offerings (IPOs) continues to draw significant investor interest. Samir Bahl, CEO – Investment Banking at Anand Rathi Advisors, recently shared his expert perspective on the current state of India's capital markets, focusing on IPO valuations, upcoming Q2 FY27 earnings, and the broader market sell-off.
IPO Market Remains Robust, Valuation Discipline Key
Bahl notes a more discerning confidence among investors in the current IPO cycle. In the first half of FY27, over 70 companies successfully raised more than Rs 92,000 crore through mainboard IPOs, marking a record for any financial year's first half. Foreign Portfolio Investors (FPIs) demonstrated conviction by investing Rs 44,960 crore in primary issues during this period, even as they divested over Rs 1.6 lakh crore from the secondary market.
However, valuation discipline is increasingly crucial. Bahl highlights that nearly two-thirds of FY26 mainboard listings traded below their offer price by March 2026, leading to a recalibration among issuers and investors. Average listing-day gains improved to 16 percent in H1 FY27, up from 10 percent in H1 FY26, indicating a market that now favors sensibly priced offerings. With approximately 237 companies preparing to raise around Rs 3.98 lakh crore, demand remains strong for issuers combining clear earnings visibility with reasonable pricing.
Q2 FY27 Earnings: Focus on Pricing Power
The upcoming Q2 FY27 earnings season will primarily test companies' pricing power, according to Bahl. With Brent crude trading above $100 a barrel and the rupee depreciating past 96 to the dollar, investors should prioritize operating margins over revenue growth. Companies that successfully pass on higher input costs while maintaining sales volumes are expected to set a positive tone for the latter half of the year.
Key Sectors to Monitor:
- Financials: Expected to contribute 38.7 percent of FY27 earnings for India's top 200 listed companies. Investors should watch net interest margins, deposit costs, and commentary on asset quality, especially ahead of the RBI's policy decision.
- Energy and Materials: Refiners, chemical producers, and other crude derivative users will demonstrate their ability to pass through cost increases. This sector faces potential downgrade risk, with its share of top-200 earnings projected to fall.
- Export Earners (IT Services & Pharmaceuticals): These sectors stand to benefit from a weaker rupee.
Market Correction Presents Opportunities
The recent market correction has brought valuations to more comfortable levels. The Nifty 50 is currently trading at approximately 19 times trailing earnings, which is about 13 percent below its five-year median and 18 percent below its ten-year median, offering a reasonable entry point for long-term investors.
Attractive Areas Post-Correction:
- Large, Well-Capitalized Banks: With strong deposit franchises, financials are poised for a growing share of corporate earnings. The Nifty Bank index trades at around 18 times earnings, significantly below its ten-year median of 25. Risks include deposit costs rising faster than loan yields and potential strains on asset quality in unsecured retail lending.
- IT Services: Direct beneficiaries of a weaker rupee, this sector gained in the week ending October 1. Key variables include discretionary technology spending, deal activity, and the translation of AI-led productivity gains into growth. A sharper U.S. slowdown remains the primary risk.
- Pharmaceuticals and Export-Oriented Manufacturers: Supported by currency gains and steady overseas demand. Risks include U.S. FDA regulatory actions and pricing pressures in generic markets.
Across all sectors, crude prices and global bond yields remain critical variables influencing the outlook.
Understanding the Market Sell-Off and Macro Risks
Indian equities are undergoing a period of recalibration. The Nifty closed at 22,421.95 on October 1, 2026, marking its eighth consecutive weekly decline, the longest streak since 2001. Foreign investors sold a net Rs 3,68,844.95 crore of Indian equities in September 2026, driven by global headwinds such as crude above $100 and US Treasury yields near two-decade highs, which pushed the rupee past 96 to the dollar.
However, domestic investors provided crucial support, absorbing approximately Rs 76,000 crore of the foreign selling in September. A sustained recovery hinges on crude prices cooling, global yields peaking, and a steady return of foreign inflows. A strong Q2 earnings season, demonstrating stable margins, would also aid stabilization. In the interim, markets are expected to remain range-bound, with investors focusing on underlying fundamentals.
Brent crude at $101 a barrel, the US 10-year yield near 5.3 percent, and India's 10-year G-sec at 7.21 percent pose significant macro risks. Higher crude fuels inflation, pressures the rupee, and squeezes margins in oil-consuming sectors. Elevated yields increase the cost of capital and divert funds towards bonds. While the Nifty's earnings yield of 5.2 percent is below the G-sec yield, limiting re-rating potential, these risks are viewed as cyclical. Projections for Brent to average around $90 in H2 2026 and $74 in 2027 suggest potential easing of pressure if crude and yields trend downwards.
Impact of Rising Interest Rates
With retail inflation at an eight-month high of 4.82 percent in August, the RBI is widely expected to raise the repo rate by 25 basis points from 5.25 percent on October 7. Higher borrowing costs will have varied impacts:
- Banks: Generally well-positioned early in a rate cycle, as loan repricing often outpaces deposit cost increases, supporting margins.
- NBFCs: Will face higher funding costs, though strong loan demand and diversified funding sources can provide a cushion.
- Rate-Sensitive Sectors (Real Estate, Autos, Discretionary Consumption): These sectors will bear the heaviest burden as higher EMIs squeeze household budgets and slow spending.
A modest rate increase is considered manageable for an economy growing at nearly 8 percent, but a prolonged period of high rates could dampen consumer-driven momentum.