India’s mergers and acquisitions (M&A) landscape is set for further growth in 2026, following a strong performance in 2025. Domestic consolidation reached an impressive $104 billion in 2025, marking the highest level in two years. Inbound deals also surged to $30 billion as banks from East Asia and West Asia significantly invested in Indian financial institutions. Furthermore, outbound transactions totaled $22 billion, the highest in a decade, primarily owing to Tata Motors’ overseas acquisitions. Experts anticipate that robust corporate confidence and healthy balance sheets will drive additional M&A activity across various sectors in the upcoming year.
Strong Domestic Consolidation and Inbound Investments
The Indian market has experienced a remarkable rise in domestic consolidation, with companies actively pursuing strategic growth opportunities. This trend is expected to persist as firms explore both local and international avenues for expansion. Amit Thawani, head of investment banking at Nomura in India, highlighted that while conglomerates have historically dominated the M&A landscape, mid-cap companies are increasingly participating, indicating a broader engagement in the M&A arena that reflects evolving market dynamics.
Inbound M&A activity continues to thrive, especially in sectors like financial services, consumer goods, and infrastructure. Rahul Mody, co-head of investment banking at Ambit, pointed out that these sectors consistently attract foreign investors due to their long-term potential. However, the focus of inbound M&A is shifting from volume to value. Sumeet Abrol, a partner at Grant Thornton Bharat, noted that while deal volumes have decreased over the past three years, the value of transactions has risen significantly, suggesting that foreign investors are becoming more discerning and willing to invest larger amounts in fewer deals.
Optimism for Continued Growth in 2026
The M&A outlook for 2026 appears positive, driven by several factors. Increasing disposable incomes and consumption growth are expected to create a conducive environment for deal-making. The Indian government has also taken steps to facilitate M&A transactions by allowing banks to finance these deals and raising foreign direct investment limits in the insurance sector. These initiatives are aimed at enhancing the attractiveness of the Indian market for foreign investors.
One notable upcoming deal is the proposed $2.3 billion acquisition of Encora by Indian IT firm Coforge. This transaction will be among the first to occur under revised foreign exchange regulations that allow for indirect foreign ownership, signaling a strong commitment to fostering a favorable environment for M&A activity and boosting investor confidence.
Sectoral Trends and Future Prospects
As the M&A landscape evolves, various sectors are expected to significantly contribute to future activity. While financial services, technology, and healthcare have traditionally led, a broader range of industries is anticipated to engage in the coming year. S Sundareswaran, Morgan Stanley’s India head of M&A, observed that the expansion of inbound M&A will progress beyond financial services and industrials, despite some foreign players occasionally exiting the market.
The shift toward a value-driven model in inbound M&A indicates a more selective approach by foreign investors. This trend is likely to persist as companies align their investments with policy-driven sectors that promise long-term growth. Bharat Anand, a senior partner at Khaitan & Co, suggested that expectations of lower interest rates from the US Federal Reserve could further bolster M&A activity, as reduced borrowing costs typically encourage more transactions.
Digihunt is not a financial advisor and this is not investment advice.