Why India’s Exit Markets Look More Functional Than the US and Europe Right Now

The global private-markets conversation has been stuck on one question for two years: where are the exits? In the US and Europe, the answer has been painfully consistent. Private markets have been “mired in an exits drought” with an extended stretch of lean distributions. When distributions don’t come back, LPs don’t recycle into new commitments, and the fundraising machine slows down.

India is the counterexample. Its private-market exit activity hasn’t just held up. It has accelerated in the years after the pandemic, with the 2025 exit value on track to exceed $36 billion, nearly matching the 2021 peak of $40 billion.

Exits work in India because the public-market channel is functioning in a way it isn’t in the West, and because a deepening domestic pool of risk capital has made that channel more reliable than most global allocators assume.

Private markets are supposed to be long-duration, but not immortal. The industry runs on a cycle: deploy capital, create value, exit, distribute, raise the next fund. Break the exit leg, and the rest of the system starts to limp.

India returned to peak form

In 2024, India surpassed China to become Asia’s largest private exits market by value, accounting for 33% of total value across Asia-Pacific. That alone is notable.

What matters more is the direction of travel. India’s exit activity has accelerated over the last three years relative to pandemic and pre-pandemic levels. And the pace has continued into 2025: exit value is on track to exceed $36 billion, close to the 2021 high-water mark.

This speed of recovery is precisely what the US and Europe have struggled to replicate. In a market where allocators are increasingly sensitive to the lack of exits elsewhere, India’s ability to bounce back bodes well for future fundraising, because distributions are often recycled into new commitments.

The core driver is public markets

The Indian exit engine is primarily a public markets story. A key driver of India’s healthy exits has been a robust IPO market. Since 2021, public listings have accounted for between 32% and 59% of total PE/VC exit value in India.

The listing cadence hasn’t collapsed the way it has in the US. By count, India’s PE/VC IPOs have been tracking within 10% to 20% of the 2021 peak over the last two years. In the US, PE/VC-backed public listings are still at an 81% shortfall versus peak levels.

If you want the single stat that captures the asymmetry: 40 PE/VC-backed Indian companies went public in 2024, versus 62 in the US, despite India’s PE/VC market being less than 5% of the US by investment volume. It implies that, in India, public markets are doing more significant private-market exit heavy lifting based on the country’s share of global private investing.

India built a domestic bid

IPO markets stay open when there’s a stable buyer base that doesn’t vanish the moment global risk turns. One of the most underappreciated shifts in India is how quickly it has developed its own pool of domestic risk capital.

Since India began easing caps on equity investing in retirement plans in 2015, households have steadily increased equity ownership from 3% to 7% of total assets. Monthly inflows of roughly $3 billion into systematic investment plans (SIPs) have stabilised equity markets, reduced volatility from foreign flows, and created a more predictable funding base for IPOs and PE-backed listings.

Then there’s distribution: the number of digital demat accounts has risen fivefold since FY20. Mutual fund penetration is still low at ~4% of the population, but is projected to rise to 15% by 2047.

You don’t need to buy the long-range projection to see the near-term mechanism: a steady domestic flow reduces the market’s dependence on foreign marginal buyers. And that, in turn, supports a more reliable IPO and block-trade exit channel. This “financialisation” has made India’s capital markets more resilient and has provided private equity investors a steadier exit channel through a growing number of public listings.

It also helps that India is now a very large public market. India’s stock market is cited at $5.1 trillion, ranking it as the fourth largest in the world after surpassing Hong Kong in 2024. Analysts project it could reach $10 trillion by 2031, which would move it into the top three. This creates a “halo” effect for private-market valuations and a tailwind for exits.

As a base condition, a large and growing public ecosystem increases the number of potential buyers, the number of listed comparables, and the number of realistic exit pathways. Robust public markets are critical because they serve as a primary route for PE and VC sponsors to exit, via listings or sales to public acquirers.

The India exit flywheel

If you want to understand why India exits are clearing, it helps to stop thinking in “one deal, one exit” terms and start thinking in loops:

1. Domestic participation rises (SIPs, demat accounts, financialisation).
2. Public market liquidity becomes more stable and less hostage to foreign flows.
3. IPOs and block trades become a repeatable exit path for PE/VC.
4. Distributions recycle into new commitments, improving fundraising resilience.
5. More capital supports more companies reaching listing quality and scale.

This loop matters because it explains why India’s exit market can remain functional even when global risk appetite is messy. It’s less fragile than a market that relies on a single window (say, mega-M&A) to clear inventory.

Bottom line

India exits work because the public-market channel is doing unusually heavy lifting, and because domestic risk capital has made that channel more stable than the US/EU, which has become far more cyclically dependent. Public listings have contributed 32%–59% of India’s PE/VC exit value since 2021. India’s PE/VC-backed listing cadence has stayed close to its 2021 peak while the US remains far below it. And the domestic bid is not theoretical: roughly $3B per month of SIP inflows, rising household equity ownership, and a fivefold jump in demat accounts have meaningfully changed market structure.

Brand Manager

Aayushi Thakur

Frequently Asked Questions

Q: What do you mean by an exit drought in the US and Europe?

A: A period where PE and VC funds struggle to sell holdings through IPOs, M&A, or secondary sales at prices that clear. When exits slow, distributions fall, and LPs have less cash to recycle into new commitments.

Q: What’s the key difference in India versus the US and Europe?

A: India’s public-market channel has remained more consistently available for PE and VC exits. IPOs and block trades have stayed active enough to clear inventory, while US and European exit markets have been more dependent on cyclical windows reopening.

Q: How important are IPOs to Indian exits?

A: Very. Since 2021, public listings have contributed roughly 32% to 59% of total PE/VC exit value in India. That range signals that public markets have been doing meaningful exit heavy lifting rather than being a marginal pathway.

Q: Why have Indian IPOs stayed more functional?

A: A big reason is the growing domestic buyer base. Steady household participation and institutional domestic flows reduce reliance on foreign marginal buyers, which helps keep liquidity and IPO demand more stable when global risk sentiment turns.

Q: What is meant by India building a domestic bid?

A: It refers to the rise in domestic risk capital that consistently buys equities. The mechanisms cited here include higher household equity ownership, roughly $3 billion of monthly SIP inflows, and a sharp rise in demat accounts, all of which broaden and deepen local participation.

Q: What is the “exit flywheel” in simple terms?

A: More domestic participation supports public market liquidity. That makes IPOs and sell-downs more repeatable. That produces distributions. Distributions get recycled into new funds. More capital helps more companies scale to listing readiness, reinforcing the cycle.

Sources

Morgan Stanley