Robust profit growth for India's Nifty 50 companies has brightened the outlook for domestic markets, but global risk aversion and a strong IPO pipeline could temper a broader rally in the near term, according to Abakkus Investment Managers.
The benchmark Nifty 50 (.NSEI) and Sensex (.BSESN) are down 7.9% and 9.8% year-to-date amid crude-driven inflation and a record $25 billion in foreign outflows. In comparison, regional peers, such as South Korea and Taiwan, are up about 50% each.
Abakkus, which manages assets worth $5.2 billion, sees elevated crude prices, rising global yields and volatility in the AI trade as key external risks for Indian equities.
"Domestically, consumer demand and corporate profitability is strong as seen in the better-than-expected Q1 results, but globally, they are not," Aman Chowhan, head of equities of Alternates at Abakkus AMC, told Reuters on Wednesday.
However, Chowhan said that "after a weak first half, India should outperform EM and Asian peers relatively, but its direction will still be dictated by global risk sentiment, with crude and the AI trade likely setting the market's tempo."
Expanding equity supply is another hurdle, with IPOs, qualified institutional placements, and block deals competing for limited capital, Chowhan said.
"Every other day there's an IPO… some promoter selling, some QIP," Chowhan said, adding "fresh issues and institutional placements are siphoning liquidity from secondary markets as investors chase listing gains and growth stories."
After 27 mainboard IPOs raised 225.72 billion rupees ($2.36 billion) in the first half of 2026, a packed August pipeline signals sustained primary market supply in the near term.
Chowhan estimates that 40-50% of capital may, therefore, be absorbed by such offerings, restricting a broader market rally.
Against this backdrop, Abakkus favors leading niche NBFCs and mid-sized banking stocks, citing stronger credit growth.
It also expects foreign investors to return to equities only gradually as years of weak returns in key sectors, such as financials and IT, have made them cautious of increasing their exposure.
($1 = 95.7525 Indian rupees)
