Whalesbook
The Volume-Value Disconnect Persists
India's dealmaking saw a record 686 transactions in the first quarter of 2026, a significant surge in volume. However, this was sharply offset by a 48% drop in total deal value to $16 billion. This divergence occurred because large deals were scarce: only two transactions worth $4.1 billion were recorded, down from seven deals worth $15 billion in the previous quarter. The trend reflects a global pattern of polarized deal activity, concentrated in specific markets and deal types.
Public Markets Show Caution
Investor caution was evident in India's public markets, influenced by global economic uncertainties. Initial Public Offerings (IPOs) and Qualified Institutional Placements (QIPs) saw a major downturn, with volumes down 63% and values down 78%. This signals a more reserved approach from issuers and investors, aligning with a global trend of cautious capital market participation. Global economic forecasts for 2026 project moderate growth of around 2-3%, with emerging markets like India expected to show relative strength, though potentially at a slower pace than in prior years.
M&A Finds Strength in Outbound Deals
Mergers and Acquisitions (M&A) activity contributed to the overall value decline, with 271 deals totaling $6.9 billion, a 59% drop in value. This was largely due to a lack of large domestic transactions. Outbound M&A, however, stood out as a bright spot, comprising 56% of total M&A value across 56 deals. A prime example of Indian corporations' growing global ambition was Coforge's $2.4 billion acquisition of Encora. This outward expansion mirrors a global trend where companies seek to gain capabilities and scale internationally, particularly in technology. Despite inbound M&A activity hitting its lowest point since Q3 2023, the strong outbound performance indicates a strategic shift.
Private Equity Focuses on Smaller Growth Companies
Private Equity (PE) saw strong volume growth with 415 deals, up 9%, but deal values decreased by 34% to $9.1 billion. This signals a clear shift to smaller transactions, with the average deal size shrinking to $21.8 million from $36.3 million in the prior quarter. Investors concentrated on high-growth firms, with three new unicorns—Neysa Networks, Juspay, and Neo Asset Management—raising a combined $703 million. This preference for smaller, growth-focused investments characterizes the current PE market, where capital is deployed selectively for operational value creation. Globally, PE megadeal activity is growing but with more disciplined valuations. Significantly, over a third of capital from newly raised Asian PE funds is now flowing into India, reflecting sustained confidence in the market's long-term prospects.
Sector Trends and Potential Concerns
Retail and consumer sectors led deal volumes with 145 transactions. IT and ITES attracted the highest value at $3.5 billion, fueled by AI and digital infrastructure investments. The energy sector, particularly renewables, also saw significant interest with $2.2 billion in deals. While deal volumes remained resilient, the persistent gap between volume and value raises questions. The lack of mega-deals, which typically boost overall value, suggests large investors may be hesitant to commit substantial capital due to economic uncertainties or high valuations in some areas. The global trend of polarized dealmaking, concentrated in select markets, could pose a risk to India if domestic growth slows or inbound investment stays low. The strong outbound M&A also points to Indian companies seeking scale abroad, potentially indicating fewer large strategic opportunities at home or a preference for international expansion. The focus on smaller PE deals suggests a cautious approach to larger, capital-intensive domestic ventures.
Outlook Tied to Domestic Fundamentals
Despite lower deal values, underlying momentum is strong, with transaction volumes increasing for four consecutive quarters. Shanthi Vijetha, Partner, Growth, Grant Thornton Bharat, noted that sustained investor confidence and solid domestic fundamentals are key drivers. Looking ahead in 2026, the market is expected to focus on high-quality assets, strategic carve-outs, and deploying private capital, particularly in technology and energy transition sectors. As global markets stabilize, India's policy continuity and growth prospects should continue attracting investment, albeit with a practical view on deal sizes and valuations.