IPO valuations, stock market correction, Q2 earnings: Anand Rathi's Samir Bahl on what investors should watch

India’s IPO market continues to attract investors despite sustained weakness in the secondary market, but valuation discipline is becoming increasingly important, says Samir Bahl, CEO – Investment Banking, Anand Rathi Advisors. In an interview with Business Today, Bahl discusses IPO trends, Q2FY27 earnings, market opportunities, the ongoing sell-off and the impact of crude, yields and interest rates. Read the edited excerpts:

BT: Despite the weakness in the secondary market, India's IPO market remains remarkably active and foreign investors are still participating in select primary issues. Is this a sign of underlying investor confidence, or are IPO valuations becoming a concern?

Bahl: It is a sign of confidence, and a more discerning confidence than in earlier cycles. In H1FY27, over 70 companies raised more than Rs 92,000 crore via mainboard IPOs, the highest for the first half of any financial year. The appetite is broad-based across instruments too. Total equity capital raised by Indian companies in H1FY27 grew to Rs 2.11 lakh crore, with QIPs contributing Rs 61,653 crore.

Foreign investors are being selective about where they commit capital, and India's primary market remains one of their preferred avenues. In H1FY27, FPIs invested Rs 44,960 crore through primary issues, even as they sold over Rs 1.6 lakh crore in the secondary market. That is a clear expression of conviction in businesses and sectors that are new to the listed space.

On valuations, the market is exercising its own discipline. Close to two-thirds of FY26's mainboard listings were trading below their offer price by the end of March 2026, and issuers and investors alike have recalibrated since then. Average listing-day gains in H1FY27 rose to 16 per cent, compared with 10 per cent in H1FY26. Today's investor is valuation-conscious and backs offerings that are sensibly priced. Our counsel to promoters is to look past day-one performance and leave something on the table for investors who stay on after listing.

With close to 237 companies preparing to raise around Rs 3.98 lakh crore, we see deep and sustained demand for issuers that combine clear earnings visibility with reasonable pricing.

BT: Q2FY27 earnings are now becoming the next major trigger for the market. Which sectors or earnings trends should investors watch most closely, particularly given the pressure from crude, currency depreciation and higher borrowing costs?

Bahl: Q2FY27 will be a test of pricing power more than of demand. With Brent crude trading above $100 a barrel and the rupee past 96 to the dollar, investors should watch operating margins rather than revenue. Companies that have passed on higher input costs while holding their volumes will set the tone for the second half of the year.

Three areas merit close attention. The first is financials, which NSE estimates will contribute 38.7 per cent of FY27 earnings for India's top 200 listed companies, up from 36.6 per cent in FY26. With the RBI's policy decision due on October 7, investors should follow net interest margins, the cost of deposits and commentary on asset quality.

The second is energy and materials, where refiners, chemical producers and other users of crude derivatives will show how much of the cost increase they have been able to pass through. Energy's share of top-200 earnings is expected to fall to 13.4 per cent from 17.6 per cent, so this is where downgrade risk sits. The third is export earners such as IT services and pharmaceuticals, which stand to gain from a weaker rupee.

BT: After the recent correction, where are you seeing the most interesting opportunities in the Indian market? Which 2–3 sectors or stocks would you be comfortable highlighting for investors at current valuations, and what are the key risks to those ideas?

Bahl: The correction has brought valuations back to more comfortable levels. The Nifty 50 now trades at about 19 times trailing earnings, roughly 13 per cent below its five-year median and about 18 per cent below its ten-year median, which offers long-term investors a reasonable entry point.

We see three areas standing out. The first is large, well-capitalised banks with strong deposit franchises. Financials will account for a growing share of corporate earnings in FY27, and the Nifty Bank index trades at about 18 times earnings against a ten-year median of around 25. The risk is that a long tightening cycle lifts deposit costs faster than loan yields and strains asset quality, especially in unsecured retail lending.

The second is IT services, which benefit directly from a weaker rupee and were the only sector to gain in the week to October 1. The key variables to watch are the pace of discretionary technology spending, deal activity and how effectively companies translate AI-led productivity gains into growth rather than pricing pressure. A sharper slowdown in the US is the main risk.

The third is pharmaceuticals and other export-oriented manufacturers, where currency gains and steady overseas demand support margins. US FDA regulatory action and pricing pressure in generics are the risks to track.

Across all three sectors, crude prices and the direction of global bond yields remain the two variables most likely to shift the outlook.

BT: Indian equities have been under sustained selling pressure, with the Nifty extending its losing streak and FIIs remaining cautious. What are the key factors behind the current sell-off, and what would it take for the market to stabilise?

Bahl: Indian equities are navigating a period of market recalibration. The Nifty closed at 22,421.95 on October 1, 2026, its eighth straight weekly decline and the longest such run since 2001. Foreign investors sold a net Rs 3,68,844.95 crore of Indian equities in September 2026. Global headwinds, including crude above $100 and US Treasury yields near two-decade highs, have compounded this pressure and pushed the rupee past 96 to the dollar.

However, domestic investors bought about Rs 76,000 crore of equities in September and absorbed much of the foreign selling. A sustained recovery will depend on crude cooling, global yields peaking and a steady return of foreign inflows. A Q2 earnings season that shows margins are holding up would also help. In the interim, we expect markets to stay range-bound, with investors focused on underlying fundamentals rather than momentum.

BT: Brent crude has moved above $100 a barrel, while the 10-year US Treasury yield and Indian G-sec yields have also risen sharply. How significant are these two macro risks for Indian equities, earnings and valuations from here?

Bahl: Brent crude is back above $100, at around $101 a barrel. The US 10-year yield is near 5.3 per cent, and India's 10-year G-sec is at about 7.21 per cent, near a two-year high. Higher crude raises inflation, pressures the rupee and squeezes margins in oil-consuming sectors, putting near-term earnings at risk. Higher yields raise the cost of capital and pull money towards bonds.

The Nifty trades at about 19 times trailing earnings, below its 10-year average, but its earnings yield of about 5.2 per cent is roughly 2 percentage points below the G-sec yield, which limits the room for a re-rating. We see these risks as cyclical rather than structural. The US EIA expects Brent to average around $90 a barrel in the second half of 2026 and about $74 in 2027. If crude moves in that direction and yields peak, the pressure on earnings and valuations should ease.

BT: With inflationary pressures rising and expectations of an RBI rate hike building, how should investors think about the impact of higher interest rates on banks, NBFCs, consumption and rate-sensitive sectors?

Bahl: Retail inflation rose to an eight-month high of 4.82 per cent in August, led by food prices, and most economists expect the RBI to raise the repo rate by 25 basis points from 5.25 per cent on October 7. Any increase in borrowing costs will ripple through the economy, affecting different sectors in different ways. Banks are generally well placed early in a rate cycle, since a large share of their loans is linked to external benchmarks and reprices faster than deposits, which supports margins.

NBFCs will face higher funding costs, though strong loan demand offers a cushion, and lenders with diversified funding will be better placed. The heaviest burden falls on real estate, autos and discretionary consumption, where higher EMIs squeeze household budgets and slow spending. A modest rate increase is a manageable speed bump for an economy growing at close to 8 per cent, but a prolonged period of high rates could weigh on consumer-driven momentum.