Rising Equity Supply to Cap Returns

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Rising Equity Supply to Cap Returns

CY26TD MFs Non-MF domestic insti. (Insurance, ETFs, AIFs) Retail (Jan-May'26) . Equitysupply pipeline also remains robust, with ~172 IPOs already awaiting regulatory clearance and Source: AMFI, NSE, Bloomberg, Jefferies

expected to hit the market in the coming months, 57 IPOs awaiting approvals. In year ending

Mar'26, 266 IPO DRHPs were filed with SEBI (all-time highest). FY27 has already seen 39 IPO

filings in ~3-mths, with 2 large IPOs (>US$ 3.5bn each) indicating continued momentum. We

estimate a supply pipeline of US$35-45bn for the remaining Jul-Dec'26, with marquee IPOs

in capital markets, telecom, AMC & quick commerce. Additionally, we note that the Govt has

upped the ante on meeting the disinvestment target (Rs600bn for the FY27, excl. strategic

divestment / privatization) with Rs.185bn undertaken in May-June'26.

Domestic equity demand to likely moderate from US$10bn/month to US$5-6bn/month.

Inflows into equity MFs avg US$4.6bn/mth Jan-May'26, 7% above from the CY25 run-rate.

However, inflows were down at US$3.2bn in month of May'26, declining 46% MoM with SIP

flows largely steady taking the lumpsum flows close to zero. Notably, the cash levels with

equity MFs have also dropped tad below avg levels. SIP returns have been weak sub-5% for

largecaps, while mid/smallcaps have delivered better returns signalling a risk to MF flows. NPS

flows into equity had jumped to US$1.5bn/month owing to one-time reset (to 25%), but that's

now behind and NPS flows will likely moderate to US$500-600m/month.

FPI outflows continue. Net FPI flows have remained weak for India with all-time highest yearly

FPI outflows of ~US$30bn witnessed in CY26 and cumulative outflows of US$60bn since

Sep'24.