Public fundraising through equity and bonds dropped sharply in H1 2026, reaching multi-year lows as companies shifted focus toward mergers and acquisitions. M&A activity climbed 31% to $86.9 billion, signaling a preference for strategic deals over public market issuance despite the broader investment banking fee decline.
What Happened
In the first half of 2026, Indian companies significantly reduced their reliance on public capital markets. Equity issuance fell by 38% to $16.5 billion, the lowest first-half level in three years. Debt markets saw an even steeper decline, with bond issuance dropping 42% to $37.6 billion, marking a four-year low. While public fundraising slowed, merger and acquisition (M&A) activity moved in the opposite direction, jumping 31% to $86.9 billion. This marks the highest first-half total for M&A since 2022, highlighting a major shift in how Indian businesses are funding their growth strategies.
The Shift to M&A
Rather than tapping the public markets for fresh capital, corporations are increasingly choosing to grow through strategic consolidation. The Materials sector has been a key driver of this trend, supported by large-scale transactions involving Vedanta group companies and Sun Pharma’s acquisition of Organon & Co. This shift suggests that companies may be finding more value in acquiring existing assets, market share, or technology rather than issuing new shares or bonds in the current market environment.
Public Market Dynamics
Within the equity space, the market has been kept afloat primarily by follow-on offerings, which made up 77% of total equity proceeds. However, even these deals were down 33% compared to the same period last year. Initial Public Offerings (IPOs) also faced headwinds, with proceeds falling 38.5% to $8.8 billion. Large firms like Adani Ports, JSW Infrastructure, and Vishal Mega Mart were among the few notable names accessing public equity. In debt markets, financial institutions remained the primary borrowers, accounting for roughly 78% of total bond issuance, though their volume still saw a sharp 40.5% contraction.
Investment Banking and Fee Environment
The cooling in public markets has directly affected investment banking revenue. Total fees for the sector dropped 20% to $614 million in the first half of 2026. While firms like Citi, Jefferies, and Axis Bank continued to lead in M&A advisory, ECM underwriting, and debt underwriting respectively, the lower volume of public deals has impacted overall earnings for these intermediaries. This decline reflects a broader caution regarding the cost of capital and current public market conditions.
What Investors Should Track
The divergence between stagnant public fundraising and active M&A suggests that corporate India is prioritizing internal consolidation over retail and institutional equity dilution. Investors should monitor whether this trend continues into the second half of the year. Key indicators to watch include whether IPO momentum picks up as market sentiment shifts, and whether the surge in M&A leads to improved operational efficiency and profitability for the acquiring companies in the upcoming quarterly results.