$70 bn in equity hits India soon: Jefferies warns of massive test for retail investors

India’s stock market is staring down a tidal wave of fresh equity supply, with an estimated $50–70 billion worth of shares set to hit the markets over the next 12 months, according to Jefferies’ latest GREED & fear report.

For context, this is nearly twice the annual equity inflow India received in 2019 and significantly higher than what domestic markets have historically absorbed.

What’s driving this massive supply? A mix of IPO pipelines, private equity exits, and promoter stake sales. All are looking to cash in while the going is good. With the MSCI India Index trading at 22x forward earnings, and 25x when excluding financials, companies are seizing the opportunity to ride the valuation wave.

The big worry: small- and mid-cap valuations are frothier than ever, and many of the upcoming issuances are concentrated in these segments. This raises serious questions about market depth and retail investor appetite in a year already brimming with global and domestic uncertainties.

Despite the supply deluge, markets have remained remarkably resilient, supported by India’s formidable domestic investor base. Monthly SIP inflows have crossed $3 billion, and equity mutual fund flows touched $21 billion in the first five months of FY26 alone. Add to that the $3 billion in net equity inflows in August, and you’d think the markets are immune to oversupply. But Jefferies warns the real test is still ahead.

Foreign institutional investors (FIIs), too, have been net sellers in recent weeks, putting the onus squarely on Indian households to absorb the flood. While they’ve done well so far, can retail investors keep pace with $70 billion in equity paper? If flows slow down or sentiment sours, expect volatility — especially in richly valued pockets.

Jefferies points out that India’s equity depth has improved since the pandemic. New demat accounts, deeper mutual fund penetration, and greater retail participation mean the market is better equipped than it once was. But even with that, a supply shock of this size is rare — and it will stretch the limits of liquidity, confidence, and patience.