Kotak says market set for heavy equity supply as sellers get 'offers they can’t refuse'

Kotak Institutional Equities, while invoking the famed Godfather line about "offers one can’t refuse", said the volume of equity hitting the market will be driven by elevated valuations and the readiness of major shareholders to sell. With stock prices running high, the brokerage expects continued supply through IPOs, block deals and secondary market sales as promoters, private equity funds and large investors move to monetise holdings amid strong retail inflows.

The brokerage pointed out that India has already seen a steady pipeline of equity issuance over the past year, reflecting how sharply rising valuations across sectors have encouraged large shareholders to unlock value. Kotak said retail participation, channelled through domestic institutions, has remained largely price-agnostic and continues to act as a strong counterparty to sellers, creating what it called “fantastic offers” for promoters and financial investors looking to exit. As long as liquidity remains abundant and sentiment supportive, the incentive to sell, it said, will remain high.

Kotak noted that the government, facing rising fiscal pressures and supported by rich PSU valuations, has room to accelerate divestments after years of missed targets. Higher dividends from the RBI have provided temporary relief, but the brokerage expects fiscal constraints to intensify from FY26 to FY27 following the GST rate cuts of September 2025, making a more aggressive divestment programme both timely and necessary.

Private equity investors, already active sellers in IPO exits and block deals, are expected to continue monetising stakes at current valuations. Kotak said PEs hold sizable positions across several listed companies and will naturally look to reduce exposure as returns become attractive.