India Technology – Internet: May-26: PE/VC slowdown continues; Eternal remains our Top Pick

Research evidence excerpt

India Technology – Internet: May-26: PE/VC slowdown continues; Eternal remains our Top Pick

Idea

June 11, 2026 11:31 AM GMT

Morgan Stanley India Company Private Limited+MIndia Technology – Internet | Asia Pacific Gaurav Rateria

Equity Analyst

May-26: PE/VC slowdown Gaurav.Rateria@morganstanley.comSulabh Govila, CFA +91 22 6118-2237

Sulabh.Govila@morganstanley.com +91 22 6118-2249

continues; Eternal remains our Shreshtha Chopra

Research Associate

Shreshtha.Chopra@morganstanley.com +91 22 6118-2227

Top Pick Sakshi Rana

Sakshi.Rana@morganstanley.com +91 22 6118-1002

PE/VC funding declined MoM to US$463mn (-20% MoM and

YoY), while India's internet market cap index witnessed some

correction, underperforming the NIFTY by ~3% MoM.

Key Takeaways

India's internet market cap index has corrected 8% from its end-Mar'26 peak,

tracking a similar pattern to the US Internet market cap index.

High dispersion across stocks: In the past month, Eternal outperformed Swiggy

India Technology

by 11% Shadowfax over Delhivery by 28%, and Paytm over Pine Labs by 14%. Asia Pacific

Industry View In-Line

PE/VC funding environment is challenging on a TTM basis (-23% YoY), but capital

continues to flow into areas – e.g., instant vertical commerce, instant services. Exhibit 1: PE/VC funding moderated on a

Earnings downgrade risks persist, driven by heightened competition (quick TTM basis in May-26

commerce, instant services) and a potential demand slowdown such as in travel.

Reiterate Eternal as our Top Pick, given good execution, a solid balance sheet, and

favorable industry growth tailwinds. Heightened competition is a key concern.

Where are we in the cycle? India's Internet market cap index has been largely flat

since Oct 2024 (vs NIFTY -6%). Over the same period, the index has significantly