BRICS – September 2026 – Proceedings

 BRICS – September 2026 – Proceedings

Introduction

The 18th BRICS Summit concluded with member states reaffirming their collective commitment to multipolarity, economic resilience, global governance reform, and peaceful diplomacy. Hosted under India’s Chairship in New Delhi, the assembly brought together global leaders to address pressing geopolitical uncertainties, economic fragmentation, and climate imperatives. The summit highlighted the evolving weight of emerging market economies in driving sustainable global development, strengthening trade mechanisms, and reinforcing international law. The unanimously adopted New Delhi Declaration set a clear framework for inclusive multilateralism and collaborative crisis resolution across the Global South.

Highlights of PM of India's Address

Humanity-Centric Multilateralism Prime Minister Narendra Modi advocated for a "humanity-first" and people-centric approach to navigate ongoing global conflicts and climate shocks. He emphasized that BRICS must deliver tangible outcomes that prioritize vulnerable communities across the Global South. The PM reiterated that the group's strength lies in unity and mutual trust rather than confrontation.

Reforms in Global Governance PM Modi called for urgent, non-negotiable structural reforms within the United Nations Security Council and global financial institutions. He noted that existing international architecture fails to reflect contemporary multi-polar realities. BRICS nations were urged to lead the push for a more representative and equitable global order.

Zero Tolerance Against Terrorism The Prime Minister highlighted the necessity of an uncompromising, unified stance against terrorism and its cross-border networks. He called for the early adoption of the Comprehensive Convention on International Terrorism (CCIT) at the UN. PM Modi urged member states to eliminate double standards when tackling global security threats.

Resilient Supply Chains and Trade Highlighting economic cooperation, the Prime Minister prioritized resilient supply chains, agriculture trade, and small and medium-scale enterprises. He noted that market barriers and supply disruptions severely impact developing economies. Collaborative trade facilitation was presented as a core strategy for post-crisis recovery.

Green Growth and Climate Action PM Modi invited all BRICS partners to join India’s global green initiatives, including Mission LiFE and the Green Credit Initiative. He stressed that climate action must balance transition goals with affordable access to energy. Environmental protection should remain tied to sustainable economic development.

BRICS as a Non-Western Platform The Prime Minister clarified that BRICS operates as an inclusive platform rather than an anti-Western coalition. He emphasized that the group seeks constructive engagement and fair participation in world affairs. The focus remains on building solutions for global challenges without creating rigid blocs.

Expansion of Digital Public Infrastructure PM Modi showcased India's successful rollout of Digital Public Infrastructure (DPI) to enhance financial inclusion. He offered to share open-source digital solutions with BRICS partners to boost global digital trade. Technology integration was positioned as a catalyst for socio-economic empowerment.

New Development Bank Expansion The Prime Minister praised the New Development Bank (NDB) for diversifying its regional footprint, including its presence in GIFT City, India. He urged NDB to fund sustainable infrastructure projects across emerging economies. Financial mechanisms must focus on long-term capital stability for member states.

Highlights of President of China's Address

Strategic Long-Term Perspective President Xi Jinping urged BRICS countries to view global dynamics and inter-bloc cooperation from a long-term strategic vantage point. He underlined that emerging economies must act as anchors of stability in a volatile world. Long-term clarity ensures that bilateral or regional friction does not derail global progress.

Opposition to Unilateral Tariffs President Xi voiced strong opposition to trade protectionism, arbitrary sanctions, and unilateral tariff measures. He warned that tariff barriers distort global supply networks and undermine World Trade Organization rules. Openness and economic integration were cited as essential for global recovery.

West Asia De-escalation Addressing ongoing conflicts, President Xi noted that prolonged warfare in West Asia runs counter to shared global interests. He urged immediate ceasefires, protection of civilian populations, and adherence to international humanitarian law. Political dialogue was highlighted as the only viable path to lasting peace.

Mutual Learning and Synergies President Xi emphasized that developing nations must leverage their complementary strengths to accelerate innovation. He noted that mutual learning in technology, manufacturing, and green energy benefits the entire bloc. Deepened industrial collaboration will foster higher-value economic output.

Building a Multipolar World The Chinese leader reaffirmed China's commitment to advancing a multipolar Asia and a balanced global governance architecture. He advocated for equitable representation for developing nations in multilateral forums. Equal consultation among sovereign nations was identified as crucial for global stability.

Support for 2027 Chairship President Xi announced China’s readiness to host the BRICS Summit in 2027 and build upon current outcomes. He pledged to maintain continuity in trade, digital transformation, and sustainable development goals. Members were invited to enhance cooperation across all institutional mechanisms.

Protection of Supply Chain Integrity President Xi highlighted the need to safeguard global logistics networks, energy routes, and raw material access. He cautioned against geopolitical decoupling and artificial fragmentation of markets. Secure and uninterrupted global supply chains remain essential for all developing countries.

Global Security Initiative Alignment President Xi reaffirmed that international security must be indivisible and based on common responsibility. He noted that no nation should enhance its security at the expense of others. Dialogue mechanisms should replace military confrontation and unilateral coercion.

Highlights of President of Russia's Address

Economic Weight of BRICS President Vladimir Putin highlighted that BRICS member states account for over half of the global population. He emphasized that the bloc’s vibrant domestic markets are growing faster than traditional G-7 economies. Shift in economic gravity toward emerging markets is now an irreversible reality.

Critique of Western Economic Policies President Putin criticized unilateral sanctions, weaponized financial tools, and trade restrictions imposed by Western nations. He stated that such measures damage the global monetary system and international trust. Alternative settlement mechanisms are vital to protect sovereign commerce.

Local Currency Settlements The Russian President called for expanded cross-border payments in national currencies among BRICS nations. He stressed that lowering reliance on single reserve currencies mitigates external financial risks. Enhanced banking connectivity will secure seamless trade flows across member states.

Energy Security and Logistics President Putin reaffirmed Russia’s role as a reliable supplier of oil, natural gas, and agricultural fertilizers. He highlighted key transport corridors like the International North-South Transport Corridor (INSTC) to streamline trade. Uninterrupted energy transit was framed as fundamental to global market equilibrium.

Fair Multipolar Financial Architecture President Putin urged BRICS to construct an independent financial infrastructure immune to external political pressure. He supported expanding joint investment platforms under the New Development Bank. Equal access to development capital must be guaranteed for all global South nations.

Nuclear Safety and Security The Russian President affirmed that nuclear safety and safeguards must be maintained without exception. He emphasized that critical energy infrastructure must remain protected even during active regional conflicts. International oversight body standards should be upheld unconditionally.

Promotion of Industrial Partnerships President Putin pointed to industrial trade expos as evidence of growing economic synergies within the bloc. He called for deeper technological exchanges, joint ventures, and raw material processing partnerships. Advanced industrialization will enhance economic autonomy across member nations.

Commitment to BRICS Expansion President Putin welcomed newly joined member states and full partner nations into the BRICS framework. He noted that institutional expansion enhances the collective leverage of the Global South. Integration processes must proceed smoothly while honouring founding principles.

General BRICS Summit Outcomes & Declarations

Unanimous Adoption of New Delhi Declaration The summit concluded with the unanimous adoption of the New Delhi Declaration by all participating members. The document outlines joint positions on global governance, economic cooperation, and security issues. It reflects consensus across diverse member nations without any recorded reservations.

Condemnation of Unilateral Coercive Measures BRICS leaders formally condemned unilateral coercive measures that bypass international law and UN principles. The joint declaration noted that arbitrary restrictions disrupt international trade and development efforts. Member states reaffirmed their reliance on legitimate multilateral institutions.

Preventive Diplomacy and Conflict Resolution The declaration stressed the vital role of preventive diplomacy, mediation, and peaceful dialogue in resolving crises. Leaders urged parties involved in armed conflicts to respect international humanitarian principles. Negotiation was reiterated as the sole mechanism for long-term peace.

Strengthening WTO and Multilateral Trade The summit voiced firm support for a rules-based, non-discriminatory, and transparent multilateral trading system cantered on the WTO. Leaders called for immediate resolution of the WTO dispute settlement body crisis. Non-tariff barriers and trade-distorting subsidies were highlighted for urgent review.

Addressing Global Food and Energy Security Members committed to keeping global agricultural markets open and reducing volatility in basic food supplies. Fertilizer supply chains were identified as essential components of global food safety. Collaborative action will focus on stabilizing commodity pricing globally.

Climate Finance and Technology Transfer The group emphasized that developed nations must fulfill their climate finance commitments to the Global South. Technology transfers should occur without artificial political or trade barriers. Climate goals must be reached while supporting national poverty alleviation mandates.

India-Russia Bilateral Engagement

Review of Special and Privileged Strategic Partnership PM Modi and President Putin held detailed talks to review the Special and Privileged Strategic Partnership. Both leaders acknowledged the steady resilience of bilateral ties despite severe external geopolitical pressure. Discussions covered political, economic, defence, energy, and space cooperation domains.

Targeting USD 100 Billion Trade by 2030 The leaders reaffirmed their commitment to boosting bilateral trade to USD 100 billion by 2030 in a balanced manner. Efforts focus on resolving trade imbalances, lowering non-tariff barriers, and expediting the India-EAEU FTA. Expanding payment systems in national currencies remains a high operational priority.

Success of INNOPROM India 2026 Both leaders welcomed Russia’s international industrial exhibition "INNOPROM India" held in New Delhi. They jointly visited the exposition floor to engage with industrial participants and trade delegations. The event marked a key milestone in expanding joint manufacturing and engineering ventures.

Civil Nuclear Energy and Kudankulam Progress Bilateral discussions highlighted Russia as India’s primary long-term partner in civil nuclear energy development. The ongoing expansion of the Kudankulam Nuclear Power Plant was commended as a flagship model of technical cooperation. Russia remains a strategic partner as India aims for expanded clean nuclear capacity.

Maritime Safety and Annual Summit Invitation PM Modi reiterated that dialogue and diplomacy remain the only path to resolve conflicts in Ukraine and West Asia. Both leaders reviewed maritime trade security in the Black Sea and Red Sea to safeguard Indian seafarers. President Putin formally invited PM Modi to visit Russia for the 24th India-Russia Annual Summit.

India-China Bilateral Engagement

Progress in Bilateral Border Disengagement PM Modi and President Xi Jinping welcomed steady disengagement along the border areas following prior high-level consensus. PM Modi emphasized that maintaining peace along border zones remains essential for overall bilateral ties. Both leaders agreed to prevent localized operational differences from escalating into active disputes.

Guidance by the "Three Mutuals" Framework PM Modi stressed that India-China relations must be strictly guided by mutual respect, mutual sensitivity, and mutual interest. He noted that respecting core strategic sensitivities is fundamental to rebuilding bilateral trust. Both leaders directed diplomatic channels to sustain structured strategic communication.

Special Representatives Dialogue Mechanism The leaders agreed that Special Representatives on the boundary question will meet regularly to oversee peace management. The mechanism will continue exploring a fair, reasonable, and mutually acceptable boundary solution. Foreign Ministry level dialogues will be fully utilized to normalize broader bilateral engagements.

Addressing Structural Trade Imbalances Economic deliberations focused on resolving structural trade imbalances and securing predictable market access. Both sides agreed to address supply chain disruptions and facilitate industrial exchange transparently. Promoting balanced economic interaction was framed as beneficial to both expanding markets.

People-to-People Connections and Multipolar Synergy The two leaders called for restoring cultural exchanges, commercial linkages, and direct mobility between both nations. They affirmed that stable ties between Asia’s two largest nations foster regional and global economic stability. Constructive India-China engagement was recognized as a key pillar for a multipolar Asia.

Conclusion

The concluded BRICS Summit marked a milestone in reinforcing the collective voice of emerging economies on global trade, governance reform, and conflict resolution. By adopting the New Delhi Declaration unanimously, member states signalled high-level consensus despite surrounding global geopolitical fractures. Bilateral engagements on the sidelines provided vital momentum to India's strategic partnerships with both Russia and China. Moving forward, the bloc has laid out a clear road map toward sustainable development, economic self-reliance, and balanced multipolarity.

Global Fintech Fest (GFF) - 2026

 Global Fintech Fest (GFF) - 2026

The 7th Global Fintech Fest (GFF) 2026 in Mumbai brought together global policymakers, regulators, and innovators to chart the future of digital finance.

Centred around the theme of "Potential to Impact," the four-day mega-summit highlighted breakthrough deployments in AI, quantum technology, and tokenisation.

Distinguished leaders from the government, banking sector, and tech industry deliberated on scaling inclusive financial systems responsibly and securely.

The event served as a monumental showcase of India's indigenous digital public infrastructure, scaling new heights of global leadership.

1.     Prime Minister Modi's Inaugural Address

Prime Minister Narendra Modi inaugurated GFF 2026 in Mumbai, highlighting India's robust macroeconomic stability and rapid structural reforms.

He emphasized that the nation's fintech journey serves as a powerful catalyst for grassroots financial inclusion and economic empowerment.

The Prime Minister noted that India's growing risk-taking capacity and startup momentum are steadily fuelling the vision of a Viksit Bharat.

He urged industry leaders to convert advanced technological possibilities into tangible, real-world societal impact.

2.     UPI's Global Expansion and Milestones

Prime Minister Modi celebrated UPI's monumental 10th anniversary, marking a decade of transforming how millions access financial services.

Highlighting that UPI processes billions of transactions monthly, he noted its successful live operations across eleven foreign countries.

He urged the fintech sector to integrate domestic payment systems with foreign networks to reduce international remittance costs.

The Prime Minister called for India to establish independent global payment standards instead of relying on foreign architectures.

3.     PM Modi's Four Strategic Priorities

PM Modi outlined four critical pillars for the future growth of India's thriving fintech and digital ecosystem.

He prioritized achieving top-notch cybersecurity to safeguard citizens against evolving digital threats and financial fraud.

He called for closer regulator-industry collaboration and the establishment of transparent ethical data production standards.

Finally, he proposed creating a Fintech Consumer Protection Index to allow customers to easily evaluate safety measures.

4.     Finance Minister Sitharaman on Demographic Dividend

Union Finance Minister Nirmala Sitharaman addressed the valedictory session, emphasizing India's active and unstoppable demographic dividend.

She criticized pessimistic global evaluations that fail to recognize how young Indians are driving economic momentum.

The Finance Minister highlighted that advanced DPI and UPI are accelerating digital penetration across diverse economic sectors.

She urged stakeholders to measure industry success through earned trust, problem-solving, and resilience rather than mere valuations.

5.     Proposal for a Federated Industry Platform

FM Sitharaman highlighted the necessity of establishing a federated industry platform for India's broader technology ecosystem.

She noted that digital platforms are inherently borderless, making foreign regulatory navigation challenging for early-stage startups.

Such a platform would provide the Indian technology sector with a credible, collective international voice.

It would facilitate early engagement with foreign regulators on licensing, cybersecurity, and cross-border compliance standards.

6.     Addressing Frontier AI Risks and Governance

The Finance Minister cautioned that frontier AI labs are racing rapidly toward self-improving superintelligence systems.

She warned that autonomous AI agents could manipulate public opinion, influence elections, or threaten national infrastructure.

She urged developers to construct AI systems that remain fast yet accountable, and autonomous yet fully reversible.

Institutions must ensure that higher-risk applications face stringent scrutiny throughout their operational life cycles.

7.     Jyotiraditya Scindia's "Digital Trinity" Framework

Union Minister for Communications Jyotiraditya Scindia introduced the concept of the "new digital trinity" at GFF 2026.

He defined this trinity as the convergence of connectivity infrastructure, advanced compute power, and absolute institutional trust.

Scindia stated that mobile phones have effectively evolved into the new bank branches for millions of citizens.

He stressed that these three foundational pillars must develop simultaneously to ensure ubiquitous technological access.

8.     Telecom and 5G Infrastructure Backbone

Scindia highlighted India's phenomenal telecom expansion, noting that 5G has covered 99.9% of districts within 26 months.

The government's BharatNet program is actively working to connect all 2.52 lakh gram panchayats with high-speed optical fibre.

Data costs in India have plummeted to around 10 cents per GB, making the country a leading data capital.

This invisible telecom highway provides the foundational infrastructure necessary for fintech and AI applications to scale.

9.     Union Minister Nitin Gadkari

Union Minister Nitin Gadkari emphasized that India is rapidly transforming its mobility sector by moving toward fully digital and barrier-free tolling systems.

He highlighted that the widespread adoption of FASTag has already reduced vehicle waiting times at toll plazas by 80 to 90 percent.

He announced plans to operationalize a multi-lane free-flow (MLFF) system to completely eliminate physical stoppages and drastically cut down operational logistics costs.

Furthermore, he noted that integrating vehicle databases, banking, and insurance data sets up a massive digital framework expected to generate substantial economic and environmental dividends.

10.Maharashtra Chief Minister Devendra Fadnavis

Maharashtra Chief Minister Devendra Fadnavis stated that while the first generation of digital finance provided basic access, the next wave must focus on giving citizens financial "agency".

He highlighted the transformational potential of agentic AI to help small businesses and ordinary citizens navigate complex financial decisions securely.

He announced that Maharashtra is actively developing a legal framework (Delta Act) for blockchain-based tokenisation to unlock productive capital from land and physical assets.

He strongly positioned Mumbai as an ideal real-world testing ground and global laboratory for designing the next generation of responsible financial technologies.

11.RBI Governor Sanjay Malhotra on Last-Mile Inclusion

RBI Governor Sanjay Malhotra urged fintech innovators to leverage AI to reach populations still excluded from formal finance.

He stressed that connecting the "last man standing in the queue" must remain the core objective of modern fintech.

Malhotra emphasized that trust is an operating asset built transaction by transaction rather than a mere marketing strategy.

He warned growing fintech firms that they carry an obligation to be "too significant to be careless" regarding resilience.

12.RBI Governor's Launch of UPI Tap & Pay and MyUPI

RBI Governor Malhotra announced the launch of customer-centric UPI innovations during the summit proceedings.

UPI 'Tap & Pay' was introduced on Point-of-Sale terminals to streamline physical retail payment convenience.

MyUPI, a customer support solution powered by NPCI's Small Language Model, was also unveiled for users.

These innovations aim to enhance payment safety, operational transparency, and digital customer grievance handling.

13.SEBI Chairman Tuhin Kanta Pandey on SupTech

SEBI Chairman Tuhin Kanta Pandey championed the adoption of supervisory technology (SupTech) for capital market regulation.

He stressed that innovation must scale without causing market risks to escalate at a matching pace.

SEBI is actively utilizing data analytics and AI to transition from basic automation to predictive market supervision.

Pandey noted that regulatory oversight must scale proportionally with proximity to trading and investor outcomes.

14.SEBI's D-MAT 2.0 Tokenised Corporate Bond Pilot

SEBI showcased its D-MAT 2.0 regulatory sandbox pilot exploring tokenised corporate bond issuances.

The initiative integrates tokenised securities with digital settlement assets using Central Bank Digital Currency (CBDC).

Three primary issuers successfully issued tokenized bonds under the pilot, supported by major stock exchanges.

This framework establishes a programmable market architecture where settlement and asset servicing occur simultaneously.

15.Nandan Nilekani on Public Chains for Tokenisation

Infosys Chairman Nandan Nilekani stated that tokenisation at population scale requires robust public chains and interoperability.

He noted that tokenisation must move beyond mere asset issuance to create genuine market liquidity and transactions.

Nilekani showcased pilots demonstrating dairy asset tokenisation and secure warehouse receipt securitization.

Public chains ensure that tokenized assets remain trustable, portable, and widely acceptable across multiple lending institutions.

16.Nilekani's Vision for AI Agents and Inclusion

Nilekani argued that AI agents will complement tokenization by driving automated demand and continuous transactions.

He emphasized that digital agents will empower small businesses by providing enterprise-grade financial capabilities.

Farmers can leverage portable warehouse receipts on public chains to significantly enhance their market bargaining power.

The overarching goal of combining tokens and AI agents is to drive profound economic inclusion.

17.NPCI's FiMI Small Language Model and AiNxt Platform

NPCI exhibited cutting-edge technological platforms designed for the next wave of enterprise banking.

It introduced FiMI, a purpose-built open-source 4-billion parameter Small Language Model tailored for banking workflows.

NPCI also unveiled AiNxt, an enterprise-focused open-source Agentic AI platform for developers and banks.

These tools enable financial institutions to build, test, and deploy customized autonomous AI agents securely.

18.Secure Element Tokenisation Platforms like Muse Wallet

GFF 2026 highlighted hardware-level tokenisation platforms like Muse Wallet, incubated at IIT Madras.

Muse Wallet converts RuPay cards into secure digital tokens stored inside tamper-resistant hardware chips.

The secure element ensures complete isolation of sensitive credentials from mobile operating systems.

Users can perform instant contactless payments via smart rings without exposing actual card numbers.

19.Real-World Tokenisation Pilots and CBDC Integration

Finance Minister Sitharaman highlighted practical tokenisation implementations during the summit exhibitions.

She cited Rural Electrification Corporation (REC) Limited's tokenized bond pilot under SEBI's regulatory sandbox.

This pilot successfully executed simultaneous bond settlement and payment using the Reserve Bank's digital rupee.

Such initiatives prove that tokenisation successfully reduces intermediaries and enables instantaneous asset transfers.

20.Emerging Fintech Trend: The Rise of Agentic AI

Agentic AI emerged as a core thematic focus at GFF 2026, redefining automated business workflows.

Unlike reactive chatbots, agentic systems possess the autonomy to sense, decide, and execute complex financial tasks.

Applications range from continuous fraud detection and compliance monitoring to personalized investment advisory.

Industry reports project massive cost-to-serve reductions for AI-native financial institutions.

21.Emerging Fintech Trend: Quantum Technology Readiness

Quantum technology was highlighted as a transformative pillar for future computational and cryptographic security.

Regulatory bodies like SEBI and RBI flagged quantum computing as an impending risk for financial systems.

Financial institutions are urged to adopt crypto-agility and migrate toward post-quantum cryptography.

Early integration aligns closely with India's National Quantum Mission to secure future capital market infrastructure.

22.Sarvam AI on Sovereign and Cost-Effective Infrastructure

Sarvam AI CEO Pratyush Kumar stressed the importance of building indigenous AI infrastructure in India.

He noted India's unique advantage lies in delivering AI computational power at a cost suitable for a billion people.

Sarvam showcased local server processing capabilities that run specialized models cheaper than global counterparts.

Sovereign deployment ensures that sensitive financial data remains secure within domestic regulatory boundaries.

23.India's Global Leadership in Real-Time Payments

India solidified its position as a global fintech powerhouse, accounting for nearly half of global real-time payments.

UPI transactions continue to smash records, crossing monumental monthly volumes across participating banks.

International linkages with countries like Singapore have normalized cross-border instant money transfers.

India's digital public infrastructure is increasingly being adopted as a blueprint by emerging global economies.

24.Macroeconomic Stability and Sovereign Rating Upgrades

Prime Minister Modi highlighted Japan's recent credit rating agency upgrading India's sovereign rating to A.

This upgrade marked a historic milestone, occurring after a span of three decades of economic development.

The rating reflects global confidence in India's macroeconomic resilience, fiscal discipline, and policy continuity.

It reinforces international investor trust in the country's accelerating reform trajectory.

25.Grassroots Credit Expansion via PM SVANidhi

The summit emphasized the profound socio-economic impact of targeted micro-credit schemes like PM SVANidhi.

The government's decision to extend PM SVANidhi until 2030 underscores its commitment to street vendors.

Digital transaction histories have enabled millions of micro-entrepreneurs to access formal institutional credit.

Beneficiaries have experienced notable increases in average annual income, stimulating grassroots economic growth.

26.Enhancing Consumer Protection and Data Ethics

Leaders across the summit repeatedly stressed that rapid technological expansion must not compromise consumer trust.

Regulators advocated for robust data ethics frameworks and transparent operational accountability across fintech firms.

Financial fraud prevention mechanisms like the Financial Fraud Risk Indicator are being integrated across banks.

The industry is actively shifting from post-fraud detection models to proactive predictive defence mechanisms.

27.Future Outlook: Connected to Empowered Finance

GFF 2026 concluded with a forward-looking consensus on transitioning from digital connectivity to financial empowerment.

The convergence of telecom networks, public digital infrastructure, and AI promises fully personalized financial services.

India aims to lead the world not just as a technology consumer, but as a creator of global standards.

The shared vision envisions a secure, inclusive, and trusted digital financial ecosystem for the entire world.

The Global Fintech Fest 2026 successfully demonstrated India's leadership in shaping the next generation of digital finance.

By championing agentic AI, robust tokenisation frameworks, and quantum readiness, the summit set a benchmark for global innovation.

Policymakers, regulators, and industry pioneers united to ensure that future financial systems remain trusted, inclusive, and secure.

As India marches toward its Viksit Bharat goals, its pioneering digital architecture continues to inspire global socioeconomic transformation.

 

India - Strategy for Peak Market Capitalisation Recovery

 ANALYTICAL REPORT: STRUCTURAL DIVERGENCE IN EQUITY CAPITAL MARKETS

Strategy for Peak Capitalisation Recovery Across Stakeholder Groups

R Kannan

Executive Summary

The Indian equity landscape in CY2026 exhibits a sharp structural dichotomy. On one hand, primary equity capital raising has surged to record levels, with corporate issuers successfully substituting high-cost debt for equity via Initial Public Offerings (IPOs), Qualified Institutional Placements (QIPs), and preferential issues. On the other hand, secondary market growth has stalled. The benchmark Nifty 500 Index stands at -1.76% YTD (as of September 9, 2026), and broader market capitalisation has experienced severe valuation contraction.

Key Finding: Across 2,583 BSE-listed companies (market cap ≥ ₹100 Cr), only 49.3% delivered positive returns and 51.4% managed to beat the Nifty 500 benchmark. Heavyweight mega-caps (≥ ₹5,00,000 Cr) severely underperformed, with just 33.3% beating the index and holding back headline stock market indices despite solid operational performance.

 

1. Capital Allocation Shift: Equity Substitution vs. Secondary Volatility

Primary Market Expansion

Over the past two years, corporate balance sheets have underwent a structural capital transformation. High interest rates and corporate deleveraging initiatives prompted issuers to swap expensive bank debt and non-convertible debentures (NCDs) for equity capital:

·        Primary Equity Issuance: In 2026 YTD alone, total equity fundraising exceeded ₹3.04 Lakh Crore across public markets. While preferential issues (₹1.77 Lakh Cr) and QIPs (₹47,881 Cr) dominated corporate re-capitalisation, mainboard and SME IPOs added over ₹41,864 Cr in fresh capital.

·        Debt Substitution Impact: Replacing debt with equity has strengthened balance sheet solvency ratios, lowered interest expenses, and elevated interest coverage ratios (ICR) across corporate India.

The Secondary Market Conundrum

Despite these fundamental balance sheet improvements, index growth has halted. Secondary market liquidity has been heavily absorbed by primary supply (IPOs and QIPs), while sustained Foreign Portfolio Investor (FPI) rebalancing and high real risk-free rates have triggered P/E multiple compression across index heavyweights.

2. Quantitative Performance & Market Cap Segment Breakdown

Data from the 2,583 BSE-listed universe highlights a strong divergence in performance across market capitalisation tiers:

Market Cap Segment	No. of Stocks	Total Market Cap (₹ Lakh Cr)	Share of Total Cap (%)	% Positive Return	% Beat Nifty 500
₹500,000 Cr+	9	83.52	17.8%	33.3%	33.3%
₹100,000–499,999 Cr	104	204.56	43.6%	55.8%	62.5%
₹40,000–99,999 Cr	114	75.61	16.1%	48.2%	51.8%
₹10,000–39,999 Cr	344	69.32	14.8%	57.6%	60.5%
₹2,000–9,999 Cr	590	28.08	6.0%	55.6%	57.1%
₹500–1,999 Cr	610	6.50	1.4%	48.5%	50.3%
₹100–499 Cr	812	1.98	0.4%	41.4%	43.0%
TOTAL UNIVERSE	2,583	469.57	100.0%	49.3%	51.4%

 

Key Segment Insights

·        The Mega-Cap Breakdown (≥ ₹5,00,000 Cr): Only 3 out of 9 stocks (33.3%) achieved positive returns or beat the benchmark. Because these 9 companies account for ₹83.52 Lakh Cr (17.8% of aggregate BSE market cap), their drag directly capped the upside on weighted indices like the Nifty 50 and Sensex.

·        The Mid-Cap Sweet Spot (₹10,000–39,999 Cr): Showed the most consistent health, with 57.6% posting positive returns and 60.5% beating the benchmark. Operational earnings growth in mid-caps was steadily rewarded with institutional inflows.

·        Small-Cap Fragility (₹100–499 Cr): Represents 31.4% of total stock count (812 stocks) but holds less than 0.5% of total market cap. Over 57.0% underperformed the index, pointing to liquidity dilution and earnings volatility in micro/small enterprises.

3. Sectoral Dispersion & Performance Drivers

Sector performance across CY2026 highlights a clear divergence between capital-intensive/defensive growth sectors and technology or global cyclical sectors:

·        Healthcare & Pharma: Outstanding relative performance (70.6% outperformance rate overall; 88.9% in the ₹1 Lakh Cr+ category). Driven by US pricing normalization, margin expansion, and steady domestic formulation demand.

·        Capital Goods & Electricals: High outperformance rates (88.6% in mid-caps, 100% in large-caps). Backed by active private capex execution and government spending on energy transmission and renewables.

·        Information Technology (IT): Major laggard sector. Only 32.7% of IT stocks beat the benchmark. Slowing global discretionary tech spend and AI-driven service transitions led to P/E derating, despite stable net margins.

·        Banking & Financial Services: Highly split performance. While mid-tier banks performed strongly, mega-cap private lenders lagged due to deposit cost pressures, net interest margin (NIM) compression, and sustained FPI selling.

4. Valuation Disconnect: Fundamentals vs. Market Capitalisation

Four key factors explain why companies reporting improving QoQ and YoY earnings have lost market value:

·        1. Multiple Compression vs. Earnings Growth: During FY21–FY24, large-cap valuations expanded well ahead of historical averages. Over the 2025–2026 cycle, despite 12–15% YoY net profit growth, Price-to-Earnings (P/E) multiples contracted from 26x to 20x forward earnings, offsetting earnings gains.

·        2. Supply-Side Liquidity Absorption: Broad capital raising (IPOs, QIPs, secondary share sales by promoters and Private Equity) absorbed domestic institutional liquidity. Secondary buyers required lower valuation multiples to absorb large block issuances.

·        3. Foreign Capital Realignment: FPIs sold over $16B–$18B in secondary Indian equities over recent cycles, reallocating capital to cheaper emerging market alternatives and high-yielding US Treasuries. Heavy FPI ownership in index mega-caps created persistent selling pressure.

·        4. Passive Index Weight Mismatches: Heavyweight stocks in top benchmarks saw reduced institutional weights during rebalancing cycles due to changing free-float dynamics and sector rotation, amplifying downward price movements.

5. Stakeholder Action Plans for Peak Capitalisation Recovery

To bridge the gap between strong corporate fundamentals and market capitalisation, each market stakeholder group must execute targeted strategic actions:

A. Corporate Leadership & Promoters (Listed Entities)

·        Capital Allocation Optimization: Divert excess free cash flow toward share buybacks when equity trades below intrinsic value rather than holding cash reserves. Active share buybacks reduce share float and immediately accretate Earnings Per Share (EPS).

·        Dividends & Return on Equity (ROE): Establish transparent, long-term dividend policies. Elevating ROE above cost-of-capital thresholds attracts long-term institutional investors who prioritize yield stability over momentum.

·        Investor Relations & Strategic Guidance: Shift market communication from short-term quarterly guidance toward 3-to-5-year return metrics. Provide segment-level earnings guidance to reduce information asymmetry among domestic and foreign analysts.

·        Prudent Primary Capital Utilization: Ensure funds raised via QIPs and preferential issues generate Return on Capital Employed (ROCE) higher than the WACC within 18–24 months to avoid equity dilution penalties.

B. Market Regulator (SEBI)

·        IPO Valuation & OFS Guidance: Enhance disclosures surrounding historical valuation metrics in draft red herring prospectuses (DRHP) to prevent overpriced primary issues from siphoning secondary market liquidity.

·        Enhanced Free-Float Rules: Review minimum free-float timelines for mega-cap listings to avoid sudden, massive supply overhangs that weigh down index stability.

·        Institutional Anchor Book Safeguards: Require longer anchor investor lock-in options (e.g., phased over 90 to 180 days) for large issuances to encourage long-term fundamental price stability.

C. Market Intermediaries & Stock Exchanges (BSE & NSE)

·        Market-Making Frameworks: Expand market-making incentives to cover mid- and small-cap segments (₹100–₹1,999 Cr), addressing liquidity gaps that drive price volatility in smaller companies.

·        New Benchmark Development: Introduce specialized operational indices (e.g., 'High-ROCE Quality Index') that weight companies by operating earnings and cash flow rather than pure free-float market capitalisation, drawing passive capital to under-priced, strong-performing stocks.

·        Global Investor Roadshows: Conduct joint BSE/NSE international investor summits highlighting the valuation reset in Indian mega-caps, emphasizing the updated risk-reward profile following P/E multiple adjustments.

D. Institutional Investors (DIIs, Mutual Funds & FPIs)

·        Focus on Fundamental Value Allocation: Pivot from momentum-driven investment styles toward fundamental value allocation. High-performing mega-caps experiencing temporary multiple compression offer attractive risk-reward entry points.

·        Active Engagement & Stewardship: Institutional shareholders should vote actively on corporate capital allocation decisions, encouraging management to optimize balance sheets through buybacks, debt retirement, or strategic reinvestment.

·        Differentiated Product Offerings: Mutual funds should launch specialized strategy products (such as high-dividend-yield or fundamental large-cap value funds) to direct record SIP capital inflows into mispriced index heavyweights.

6. Strategic Outlook

The Indian equity market is navigating a classic transition phase: shifting from liquidity-driven multiple expansion to an earnings-driven cycle. The corporate sector's proactive effort to substitute debt for equity has established healthier, lower-leverage balance sheets.

As primary market supply balances out, and domestic institutional liquidity continues to absorb foreign capital flows, valuation multiples are positioned to align with underlying earnings performance. Implementing these targeted action plans across corporate management, regulators, exchanges, and institutional investors will help re-anchor market capitalisation to corporate earnings performance and guide well-performing index leaders back toward peak valuation levels.