Global shocks, IPO wave could temper India's earnings-led market revival, Abakkus Investment says

Abakkus Investment Managers predicts that global risk aversion and a strong pipeline of Initial Public Offerings (IPOs) could potentially dampen India's domestic market recovery, despite robust profit growth for Nifty 50 companies. The benchmark Nifty 50 and Sensex have declined by 7.9% and 9.8% year-to-date, driven by inflation fueled by crude oil prices and a record $25 billion in foreign outflows. In contrast, regional markets in South Korea and Taiwan have seen gains of around 50% each.

Abakkus, a $5.2 billion asset manager, identifies high crude prices, increasing global yields, and a volatile AI sector as the primary external risks facing Indian equities. However, Abakkus' Aman Chowhan, head of equities of Alternates, believes that despite a weak first half, India should outperform emerging market (EM) and Asian peers in the long run. The market's direction, he suggests, will still be heavily influenced by global risk sentiment, with crude and the AI sector setting the market's pace.

Chowhan also highlights the challenge of expanding equity supply, citing the ongoing flood of IPOs, Qualified Institutional Placement (QIP), and block deals competing for limited capital. During the first half of 2026, 27 mainboard IPOs raised a combined 225.72 billion rupees ($2.36 billion), and an upcoming August pipeline of IPOs is expected to continue this trend. Abakkus estimates that as much as 40-50% of capital may be absorbed by these offerings, thereby restricting a broader market rally.

Given these conditions, Abakkus suggests that niche non-banking financial companies (NBFCs) and mid-sized banking stocks could present a better opportunity, citing stronger credit growth. The firm also anticipates a gradual return of foreign investors to Indian equities, as years of poor performance in sectors like financials and IT have made them cautious about bolstering their exposure in the near term.