Corporate deals and IPOs push ahead despite volatility in Indian equities

Indian equities are under pressure, but even as indices slip and sentiment turns cautious, a set of deal- and stock-specific stories is quietly pushing ahead through the noise.

On December 2, the benchmark indices tumbled over 500 points. Yet signs of resilience showed up in restructuring moves like Vedanta’s demerger and a crowded IPO calendar led by issues such as KSH International.

The past month has been marked by repeated 300–500 point swings on the Sensex and sharp intraday reversals on the Nifty, as traders booked profits after record highs while still selectively backing corporate actions and new listings.

Indices slide, breadth weakens

Over the past quarter, the Sensex has pushed above the 85,000 mark several times, only to retreat after those rallies. On many sessions, the index has ended 0.5–0.7 per cent lower as global markets turned “risk-off” — a phase when investors pull money out of equities and move towards safer assets like bonds or the dollar.

The Nifty 50 has largely hovered around 26,000, dipping below that level on weaker days. Mid- and small-cap stocks have lagged the broader market, showing greater caution in SMID-cap names (small- and mid-cap stocks), even as heavyweight IT and energy stocks have occasionally limited the overall fall in the indices.

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Importantly, these sell-offs have not turned into panic. Spikes in volatility — measured by the India VIX, often called the market’s “fear gauge” — have been short-lived and have eased soon after each bout of selling. That pattern suggests investors are rotating money between sectors and booking profits, rather than losing confidence in the market as a whole.

By sector, banking, financial services and real estate stocks have seen the sharpest corrections this month. Private banks and diversified lenders have been especially sensitive to a weakening rupee and rising US bond yields, both of which tend to pressure emerging-market stocks.

Foreign institutional investors (FIIs), who move large sums of global capital, have periodically sold Indian equities during these phases, adding to the pressure on interest-rate-sensitive sectors. At the same time, domestic investors have continued to put money into equities, helping cushion the downside.

With global sentiment swinging back and forth and Indian indices still trading close to record highs on a one-year view, many traders have used market dips to lock in profits in overheated stocks, rather than walking away from India’s longer-term growth story.

What’s driving the fall

Vinod Nair, Head of Research, Geojit Investments Limited, captured the mood succinctly: “Domestic markets continued to witness profit booking amid worries over the weakening rupee and persistent FII outflows.”

He also flagged the technical shock from index changes, noting that “the NSE’s sectoral index overhaul in line with SEBI regulations led to corrections in major banking counters.” In his view, near term sentiment is likely to stay fragile as investors watch both macro data and policy cues.

In a separate comment, Nair warned that “in the near term, fading expectations of an RBI rate cut owing to strong GDP data and the uncertainty around US India trade discussions may keep investors on edge.”

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At the same time, he pointed to an important counterweight: “solid domestic macro fundamentals and a strengthening earnings outlook for the second half of the fiscal year are likely to lend support going forward.” This mix of short term caution and long term confidence explains why indices can slide even as primary and secondary deal activity stays robust.

Vedanta’s demerger sets a marker

One of the clearest examples of that divergence is Vedanta Limited, which secured National Company Law Tribunal approval to split itself into multiple listed entities. The demerger plan, announced earlier, intends to split key verticals such as aluminium, oil and gas, zinc, iron ore and steel, and power, with existing shareholders receiving shares in each new listed company. Analysts say the demerger will allow investors to see how each part of the business is performing separately, rather than trying to judge many different businesses as one.

Analysts also warn that the success of the split will depend on how Vedanta divides its debt between the new companies, how well each is run, and how exposed they are to ups and downs in metal prices. Yet, the very fact that such a complex restructuring is moving forward at a time of index level volatility underscores that corporate actions are being driven by long term strategic goals rather than day to day price swings, say brokers.

KSH International steps into spotlight

On the primary market side, KSH International is pressing ahead with a Rs 710-crore initial public offering even as secondary markets wobble. The IPO, a book built issue with a price band of Rs 365 to Rs 384 per share, opened for subscription on December 16, and closes on December 18 (today), with plans to list on both the BSE and NSE. Proceeds are earmarked for debt repayment, capacity expansion, a new solar facility and working capital, signalling an aggressive capex push linked to electrification and infrastructure growth.

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Public reviews of the issue point to a solid recent track record. One detailed analysis notes that KSH International’s total income rose from Rs 1,056.60 crore in FY23 to Rs 1,938.19 crore in FY25, while net profit increased from Rs 26.61 crore to Rs 67.99 crore and EBITDA margins expanded from 4.72 per cent to 6.32 per cent over the same period.

The same review highlights a return on equity of 22.77 per cent in FY25 and describes valuations as “fair” rather than cheap, suggesting that near term listing gains may be modest but the structural growth story in EVs and renewables remains attractive for patient investors.

Volatility outside, deal flow inside

Taken together, these strands sketch a market in which headline indices can drop 500 points in a day even as corporate India pushes ahead with demergers, capex and fresh listings. Banking, realty and SMID cap stocks may be absorbing the brunt of profit taking in the short term, but structurally, deal making has not paused and, in some pockets, has actually accelerated.

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For investors, said brokers, the challenge in this phase is less about predicting the next 100 points on the Nifty and more about distinguishing between index level noise and stock specific narratives like Vedanta’s demerger and KSH International’s IPO that could define returns long after this particular bout of volatility has passed.