Ongoing IPO in 2025 rush limits material market upside: Bernstein

There is a lack of conviction on Indian equity markets, as the positive narrative has been shaken a bit amid a year of sluggish macros, earnings cuts and geopolitical shifts, wrote analysts at Bernstein in a recent note post their investor conference. 

 

While Bernstein has retained its Nifty target of 26,500 levels by 2025-end (barely 5 per cent return from the current levels), the ongoing IPO rush, it believes, limits material market upside potential. Financials, telecom and parts of consumption chain are among its key overweight sectors in the Indian context.

 

Thus far in calendar year 2025 (CY25), 74 companies have raised Rs 85,241.08 crore from the primary markets and excludes the three big IPOs that opened for subscription in the last few days. CY25 primary market mop-up is the third highest amount raised in the last five years, data shows.  

 

In the last few days, WeWork India, Tata Capital, and LG Electronics India, launched their public issues and aim to collectively raise over Rs 30,000 crore. As per offer documents, Tata Capital plans to mobilize around Rs 15,511.87 crore, LG Electronics India Rs 11,607 crore, and WeWork India nearly Rs 3,000 crore.

 

Key market risks

 

One key takeaway from their investor meetings, wrote Garre, was the lack of FII (foreign institutional investor) interest in India, especially with $18 billion outflows this year. In this backdrop, Indian markets have remained relative underperformers in the Asian region with a gain of around 5 per cent thus far in calendar year 2025 (CY25). 

 

KOSPI (up 48 per cent), TAIEX (17.3 per cent) and Shanghai Composite (16 per cent) have far outrun the Indian frontline benchmarks during this period, data shows.

 

“What will drive a return of FIIs is fairly simple in our view. India needs to have a proper positioning in terms of long term drivers which is getting a bit hazy now. A trump India deal can resurrect some of that as risk on currency deprecation also moderates. Valuations have to correct or earnings growth comfort has to resurface,” Garre wrote.

 

The three pillars of the next stage of growth – manufacturing, services and digitization, Garre believes, are all facing some sort of risks. A part of that, he said, is linked to geopolitics, while some of it was due to the lack of organized focus on building innovation and policy push to build national champions. 

 

If India and the US are unable to reach a trade agreement, Bernstein believes, the ‘China plus one’ strategy could falter, potentially making India a destination for Chinese products and investments, rather than a true competitor.  

 

“The services sector faces uncertainty from rapid AI adoption, while digitization remains relevant but is challenged by the dominance of US tech giants and India’s struggles to recapture control of its digital ecosystem. Meanwhile, questions are mounting around whether India can generate enough quality jobs and real wage growth to sustain optimism,” Garre wrote. 

The 'India' bulls 

‘India bulls’, according to the note, are still hoping for an early resolution to the US tariff issue, bringing down the tariffs from the current 50 per cent to a more palatable 25 per cent. 

 

On the positive side, manufacturing-related sectors, they believe, should continue to attract investment, and improved China-India relations could facilitate access to technology and capital which, while carrying long-term strategic risks, could offer short- to medium-term gains in job creation.

 

“Improving system liquidity, a policy pivot after a period of inertia, and space for potential rate cuts help cushion economic risks. As a result, our base case remains a stable 6.5 per cent GDP (gross domestic product) growth trend line for India,” the Bernstein note said.