The most immediate challenge is the sheer scale of the IPO pipeline. More than 190 companies are expected to tap the primary market in 2026, collectively seeking to raise over Rs 2.5 lakh crore. Such a heavy issuance calendar raises a fundamental question: will the IPO rush end up killing the goose that laid the golden eggs? HDFC Securities flags the risk of a “liquidity drain” in the secondary market as capital is diverted towards new listings. With investor funds being absorbed by fresh paper, trading activity and price discovery in listed stocks could come under pressure.
Compounding this concern is the uncertainty around foreign investor flows. Even after a meaningful consolidation in 2025, Indian equities continue to trade at a premium to other emerging markets such as China and Brazil. Foreign institutional investors pulled out nearly Rs 3 lakh crore from Indian equities in 2025. While there is hope that flows could stabilize or even reverse in 2026, HDFC Securities cautions that several factors may still keep foreign capital on the sidelines.
That said, the broader global and domestic backdrop offers reasons for guarded optimism. Global trade uncertainty is expected to gradually come down, aided by easing geopolitical tensions and the prospect of tariff reversals. Trump’s trade policies, which have been a major source of disruption, are expected to diminish further as a dominant influence on the global economy. “Emerging markets rotation is anticipated, with India as a key beneficiary,” it added.
Within this framework, emerging market rotation is anticipated, with India seen as a key beneficiary. China’s GDP growth is expected to remain stable, while crude oil prices are likely to stay subdued, easing pressure on inflation and external balances. Central bankers’ sustained demand for gold is expected to keep the metal buoyant through 2026, reflecting lingering caution even as growth stabilises.
India’s domestic macro story remains a key pillar of HDFC Securities’ outlook. Rate cuts, CRR reductions and liquidity infusion form part of this supportive policy mix. Structural domestic demand and a rising allocation of household savings towards equities continue to provide a strong internal cushion, possibly reducing dependence on foreign flows.
Digital infrastructure improvements and the rapid digitisation of payments are also highlighted as structural positives, creating new economic opportunities and enhancing efficiency across sectors. Against this backdrop, nominal GDP growth is expected to enter double digits in 2026, setting the stage for an earnings recovery after a challenging period.From a market perspective, valuations have corrected meaningfully, and foreign portfolio investor exposure is at historically low levels. Together, these factors create upside potential if sentiment turns. HDFC Securities expects India’s markets to deliver a “Goldilocks” outcome, characterised by a broad-based recovery. Industrial metals are expected to shine, reflecting improving global demand, while the rupee is projected to remain stable.
For FY27, Nifty earnings are expected to grow by 16%, translating into an anticipated annual return of about 11% for the index, pegging a yearly Nifty target of 28,720.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
