How India’s PE/VC ecosystem is sustaining momentum amid global volatility

A year of resilience

India’s private equity and venture capital (PE/VC) ecosystem continued to demonstrate strategic depth and maturity in 2025, despite an external environment marked by considerable global uncertainty. Investor sentiment was influenced by a convergence of factors: India’s domestic political landscape, the outcome of the November 2024 US elections, persistent geopolitical tensions, shifting tariff policies, etc. Added to this, the Indian Rupee weakened to its lowest levels, heightening caution among foreign investors. Amid these complexities, the Indian PE/VC industry recorded one of its strongest years on record, signaling the resilient economic fundamentals and sustained investor confidence.

Key highlights:

Robust investment performance despite global challenges: 

India attracted US$60.7 billion across 1,475 PE/VC deals in 2025, representing 8% year‑on‑year growth in value and 9% growth in volume, the highest deal counts ever recorded. Growth and startup segments continue to drive momentum, with growth investments emerging as the strongest engine of deal activity, recording a 56% increase in volume to 282 transactions, while startup investments also expanded, rising 19% year‑on‑year to 767 transactions.

Sectoral landscape:

Sector allocation in 2025 largely mirrored 2024 patterns. The top five sectors — financial services, infrastructure, real estate, technology, and e‑commerce — contributed 72% of total investments, consistent with last year. Financial services emerged as the largest sector, overtaking infrastructure. Infrastructure, which topped the list in 2024, moved to second place in 2025.

Six sectors achieved all‑time high investment levels, including financial services, real estate, food and agriculture, automotive, industrial products, and aerospace and defense.  

Real assets and pure‑play PE

Real assets (infrastructure and real estate) rebounded by 2% in 2025 after an 8% contraction the previous year. Pure‑play PE/VC investments grew 12%, moderating from 15% growth in 2024, continuing to form a key pillar of India’s deal pipeline.

Exit activity strengthens, led by strategic sales

India recorded US$32.9 billion across 257 exits, the second-highest exit value ever, behind only the 2021 peak. This translated into 17% growth over 2024, despite a 10% decline in exit volumes. Strategic exits surged 211% year‑on‑year to US$16 billion. These contributed 48% of total exits in 2025, reflecting a renewed interest from corporates — both domestic and global — in consolidation, capability acquisition, and expansion into high‑growth verticals.

Fundraising hits a historic peak

The confidence of limited partners in India remained strong. Fundraising activity hit an all‑time high of US$23.2 billion, up from US$9.8 billion in 2024, and recorded 123 fundraises, the highest annual tally on record.

What Could Drive Investor Caution in 2026:

Despite a strong base, 2026 begins with several complexities that could influence investment pacing:

• Policy uncertainty after tariff revisions: Although US tariffs on Indian exports have been reduced from 25% to 18% following a Supreme Court ruling, implementation guidelines are still awaited. The lower duties are positive for India, but clearer rules are needed for effective planning and investor confidence.
• Equity market volatility post‑budget: The increase in Securities Transaction Tax (STT) in the Union Budget 2026 triggered notable volatility, impacting valuations and exit timelines. 
• Geopolitical pressures: The escalating Iran–Israel–US conflict poses inflationary risks, particularly on account of its impact on crude oil supply and prices, which is critical to India’s macro stability.
• Divergent corporate earnings: December 2025 quarterly earnings show mixed signals. Strength observed in financial services, IT, healthcare, industrials, and weakness in energy, metals, mining and telecom.  
• Currency depreciation: The Rupee touching INR92/USD has heightened foreign investor caution and affected return expectations. Dollar returns for foreign investors have not been good, and the muted earnings growth does not inspire confidence. 
• Valuation mismatch: A widening bid–ask spread — sellers maintaining high valuation expectations vs. buyers exercising discipline — has slowed deal closures.

Positive drivers supporting the PE/VC landscape in 2026

Despite short‑term uncertainties, India’s structural fundamentals remain intact and supportive of a strong investment outlook.

• Robust GDP trajectory: India is projected to grow at ~7%, positioning it among the world’s fastest‑growing major economies.
• Monetary easing cycle: With the RBI reducing repo rates by 125 bps in 2025, and inflation expected near 4%, monetary conditions are supportive of capital deployment.
• Government capex push: FY27 Budget allocation of INR 12.2 lakh crore toward public capex continues to build strong pipelines in infrastructure and manufacturing.
• Strengthening IPO pipeline: A robust pipeline is expected to improve exit visibility and capital recycling, key for sustained PE/VC activity.
• Strengthening India–US trade framework: Progress towards an interim tariff agreement — reducing tariffs to 18% for key sectors — reinforces a positive medium-term outlook. While the eventual tariff’s framework may yet again chance, things are directionally positive.

As we move into 2026, the landscape will be shaped by the interplay of global geopolitics, domestic policy shifts, valuation rationalization and underlying economic fundamentals. While short‑term caution is warranted, the medium‑ to long‑term outlook remains unequivocally positive. As macro risks stabilize and the bid–ask spread narrows, PE/VC investments are expected to accelerate through 2026, supported by strong structural fundamentals, a deepening corporate ecosystem, and continued global investor interest in India’s growth story. We are cautiously optimistic.