Muted stock market returns will boost interest in private equity, says Vikas Sharma

Sharma was speaking at Moneycontrol's Global Wealth Summit 2025.

Discussing the high likelihood of muted stock market returns in 2025, Vikas Sharma, Head - Wealth Management and Private Banking, IDFC said that the pace of public offering in the market will take a significant hit, re-routing investors to the private equity space.

Sharma was speaking in a panel discussion on " The great 2025 market hunt: Timing, trends and alpha plays" at Moneycontrol's Global Wealth Summit 2025 that took place in Mumbai today.

Sharma believes that the pace of companies opting for an IPO typically slows down in year when market returns are expected to be muted. "That will lead a lot of activity in the private equity space, which I feel is going to generate a lot of demand and interest of the investor community to look at this space," Sharma said.

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Sharma further added that the private equity space would also enjoy the advantages of much cheaper valuations unlikely high pricing seen post-IPOs. "Valuations in that space will be far far attractive for investors," he stated.

"We've seen very expensive landing in the market, so the trend that I notice is that a lot of interest is moving to private equity, the pre-IPO space," he added. This increased interest and demand in the unlisted space will attract a lot of investors chasing much cheaper valuations.

As for the secondary market, Sharma highlighted that valuations have never been cheap. "When markets are in a phase like this, which is sort of a bear phase, people often start thinking about whether it is a time to sit on cash or just exit. But people need to realise that valuation is not the only factor to determine whether the investment is worthy," he said.

He further pointer fingers towards other factors like liquidity, which has a significant bearing on market performance. To that effect, Sharma attributed tight liquidity conditions as a major cause along with muted earnings as the reasons behind the current market downturn.

"There was plenty liquidity post-COVID and then people didn't care about valuations. India is never going to be a cheap market, the current correction is due to a lack of liquidity and muted earnings, but it presents a good time for a reset and for valuations to come to reasonable level," Sharma said.

In addition, Sharma offered a much optimistic future for India's stock markets. "India to me is fundamentally great, it is just facing a few headwinds at this point in time which seems temporary. However, the investment opportunity still remains great," he added.

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