Heavy IPO supply is keeping Indian stock valuations in check, says ICICI Prudential's Anand Shah

Anand Shah, CIO of PMS and AIF at ICICI Prudential AMC, which managed $3.24 billion in assets as of July 31, 2026, said, "The valuations are remaining in check because of all the supply that we are seeing". He was responding to concerns that India's markets are being flooded with new share sales.

Shah said the wave of new listings is not a warning sign. Instead, he called it a byproduct of what he termed ‘financialisation of savings 2.0’ — a shift of Indian household money from gold and real estate into bank deposits, and now into equities. He said this shift means demand for stocks, and for new supply to absorb it, will likely continue.

Shah said existing investors may feel some pain because the flow of new shares is limiting how fast the market can rise. But he said this is a benefit for new investors, since it keeps valuations from becoming excessive. "It's a comfort that the market has not become overtly expensive, where you and I can really tell that this is an absurd valuation," he said.

Shah also pushed back on the idea that Indian investors should look abroad for better opportunities given India's $8 billion cap on mutual fund investment overseas. He said foreign equities look too overhyped at this point in time, and that India's economy remains young, with a long growth runway and companies that deliver stronger returns on equity than other emerging markets.

Sector disruption: Paints, cables and autos

Shah pointed to a broader shift now playing out across Indian industry. For roughly 15 years, he said, equity markets rewarded consumer-facing brands that benefited from cheap imports and low inflation, much of it driven by China. He said that era is ending as China pulls back from exporting deflation, due to tariffs, rising domestic costs and internal shifts in its economy.

This has triggered new entrants and rising competition in sectors that were once stable, including paints and cables. Shah said investors need to watch which sectors are consolidating and which are fragmenting, since consolidation tends to drive wealth creation while fragmentation can destroy it. He cited telecom as an example: heavy competition among operators produced no wealth creation for years, but consolidation has since made it one of India's best-performing sectors this year.

The same fragmentation is emerging in autos, Shah said, as electric vehicles gain market share from legacy players. He said entry-level car demand is slowing while EV penetration rises in both four-wheelers and, increasingly, two-wheelers. He added that tensions in West Asia could add to this shift by raising costs for petrol and diesel vehicles and pushing governments to boost EV incentives further.

New-age stocks and IT remain split calls

On new-age listed companies such as Eternal and Nykaa, Shah said the sharp post-listing declines they saw are behind them. "We have passed that phase," he said, adding that these companies now show clearer business models, slowing competition from new entrants, and growth rates ahead of the broader market — a contrast to large-cap stocks, where earnings growth has been harder to find.

IT services remain a harder call. Shah said artificial intelligence (AI) is weighing on revenue growth across the sector, and while companies have managed the pressure better than expected, the impact is not over. "That pressure remains relentless," he said.

ICICI Prudential remains underweight IT overall but is selectively adding to a small number of companies where valuations now look more reasonable than they did a few years ago.

For the full interview, watch the accompanying video

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