Outbound activity also gathered momentum, jumping to $22 billion — the highest level in a decade — led by overseas purchases by companies such as Tata Motors and Tega Industries. Among emerging markets, India ranked second in deal value, trailing only China’s $410 billion, Dealogic data showed.
Bankers expect the momentum to carry forward. “We see sustained strength in M&A activity in 2026, supported by healthy corporate balance sheets and increasing confidence among promoters,” said S Sundareswaran, head of M&A for India at Morgan Stanley.
While sectors such as financial services, technology and healthcare have historically dominated deal flow, the coming year is likely to see participation broaden across industries, Sundareswaran said. He added that deal activity will be driven by both Indian companies and global strategic buyers, with inbound M&A extending beyond banking and industrials, even as some foreign investors continue to exit selective assets.
Domestic consolidation is set to remain a defining trend, as Indian companies focus on strengthening their positions at home while pursuing overseas opportunities selectively, said Amit Thawani, Nomura’s India head of investment banking.
The profile of dealmakers is also evolving. “Conglomerates have traditionally anchored domestic consolidation, but we are now seeing mid-sized companies — previously absent from such transactions — actively pursuing acquisitions,” Thawani said. He pointed to deals such as Mankind Pharma’s acquisition of Bharat Serums and Vaccines, Tilaknagar Industries’ purchase of the Imperial Blue brand, and Jubilant’s takeover of Hindustan Coca-Cola Beverages as recent examples of this shift.
Inbound transactions are expected to remain strong in areas such as financial services, consumer-facing businesses and infrastructure, which continue to appeal to long-term foreign investors, said Rahul Mody, co-head of investment banking at Ambit.At the same time, the nature of inbound M&A is changing. “Foreign investment is becoming more value-focused rather than volume-driven,” said Sumeet Abrol, partner at Grant Thornton Bharat. While the number of deals has declined over the past three years, transaction values rose sharply in 2025, indicating greater selectivity and larger cheque sizes. He added that capital is increasingly flowing into policy-aligned sectors such as financial services, manufacturing and energy.
The year’s biggest inbound deal in financial services was Japan’s Mitsubishi UFJ Financial Group acquiring a 20% stake in Shriram Finance for $4.4 billion. This was followed by Dubai-based Emirates NBD’s $3 billion investment in RBL Bank and a $1.6 billion capital infusion by Japan’s Sumitomo Mitsui Banking Corporation into Yes Bank.
Dealmakers are also closely watching the potential privatisation of IDBI Bank next year, as the government looks to reduce the number of public sector banks from 12 to four or six. Fairfax Group and Kotak Mahindra Bank have expressed interest, underscoring sustained investor appetite for Indian financial assets.
Confidence around an active 2026 is further supported by rising household incomes, strengthening consumption and a favourable policy backdrop. Recent regulatory changes — including allowing banks to finance M&A transactions, raising foreign direct investment limits in insurance, and permitting direct share swaps between Indian and overseas companies — are expected to further catalyse deal activity.
Among the first transactions to benefit from revised foreign exchange rules is Indian IT firm Coforge’s proposed $2.3 billion acquisition of Encora. The changes allow overseas shareholders of Encora to indirectly hold equity in Coforge, a structure that was previously prohibited and effectively blocked non-cash overseas acquisitions by Indian firms.
Expectations of lower interest rates in the US could provide an additional tailwind, said Bharat Anand, senior partner at Khaitan & Co. A softer rate environment typically reduces borrowing costs and improves deal economics, reinforcing optimism around India’s M&A outlook for 2026.
With inputs from TOI
