Government’s Holdings in Listed Companies Reach ₹44 Lakh Crore as Divestment Options Widen
The Indian government is sitting on a listed equity portfolio worth about ₹44 lakh crore, giving it considerably more financial flexibility than it had before the pandemic as policymakers weigh future stake sales.
The valuation, cited in an Axis Capital report, is nearly four times the pre-Covid level and amounts to more than $400 billion. Much of that wealth remains concentrated in public-sector companies, including banks and other financial institutions.
Axis Capital estimates that selling the equivalent of 15% of these holdings over three years could generate approximately ₹6.6 lakh crore.
That calculation is not a government divestment target or an announced sale programme. It is an estimate illustrating how the rise in public-sector valuations has increased the amount the state could potentially monetise while retaining substantial ownership.
Rising Valuations Have Changed the Divestment Equation
For years, India's divestment debate has largely focused on how much money the government can raise from selling stakes in state-controlled enterprises. The sharp increase in the value of those holdings has altered that calculation.
The government now has a much larger asset base from which to sell relatively small portions.
That distinction matters. Raising money through the stock market does not automatically require privatising a company. The government can reduce its stake, increase public ownership and still remain the controlling shareholder where policy requires it.
At current portfolio values, even measured reductions could produce substantial receipts.
Axis Capital's ₹6.6 lakh crore estimate demonstrates the scale involved. Spread across three years, such sales could also avoid concentrating an unusually large amount of government equity supply into a short period.
More PSU Shares Could Ease a Market Supply Constraint
There is another reason for the brokerage's focus on stake sales: the amount of capital competing for Indian equities.
Domestic investment flows have remained an important source of support for the stock market, particularly as foreign portfolio investors have periodically pulled money out of Indian shares.
That creates an unusual dynamic. Strong domestic demand can support markets during periods of foreign selling, but persistent inflows also increase competition for the existing pool of investable stocks.
Axis Capital's prescription is straightforward: “More high-quality supply is the solution.”
Government stake sales could provide part of that supply.
Increasing the publicly traded portion of established public-sector companies would give institutional investors more shares to absorb and could improve liquidity in stocks where government ownership remains high. It would also allow the state to monetise part of its investment without requiring the underlying company to raise fresh capital.
Foreign Investors Remain Sensitive to Valuations and Earnings
The discussion comes as foreign investor behaviour remains an important variable for Indian equities.
Axis Capital identified elevated valuations and a prolonged period of weak corporate earnings as factors influencing foreign selling.
India is not alone in experiencing outflows. The report pointed to selling in markets including Taiwan and South Korea, while China and Brazil attracted foreign capital. The United States received portfolio equity inflows of about $735 billion in 2025.
India's domestic investor base has helped cushion the effect of foreign withdrawals, but greater availability of listed equity could become increasingly relevant if household and institutional flows into the market remain strong.
Divestment Could Provide a Fiscal Cushion
The government's growing equity portfolio also matters beyond the stock market.
Axis Capital identified possible pressure on public finances from weaker-than-budgeted tax growth and higher subsidy expenditure. According to its estimates, income-tax growth of 12%, compared with the 18% implied in the Budget, could produce a revenue shortfall of around ₹76,200 crore.
That does not mean such a shortfall will necessarily occur. It is a scenario presented in the brokerage's analysis.
Still, the calculation explains why asset sales can become useful when conventional revenue sources fall short. Cutting expenditure is one response to weaker receipts, but aggressive reductions in government spending can have consequences for investment and economic activity.
Divestment provides another option: raising funds from assets already owned by the state.
Fiscal demands could also increase from FY28 as expenditure associated with the 8th Pay Commission begins to feed into government finances, according to Axis Capital.
FY27 Programme Has Already Advanced
The current financial year's divestment programme has made substantial early progress.
Around 70% of the FY27 target had been achieved during the first five months of the year, helped significantly by an offer for sale in Life Insurance Corporation of India.
IDBI Bank represents another important transaction to watch as the government proceeds with plans to sell its stake in the lender.
Individual transactions, however, tell only part of the story. The ₹44 lakh crore valuation raises a broader policy question about whether India should move towards a more regular programme of reducing government ownership in listed enterprises rather than relying primarily on a smaller number of large transactions.
Industry Has Also Called for Lower Government Stakes
The case for accelerating divestment has also been raised outside the brokerage community.
Earlier in 2026, the Confederation of Indian Industry proposed reducing government holdings to 51% in 78 listed public-sector enterprises. CII estimated that such a move could unlock close to ₹10 lakh crore.
That figure should not be directly compared with Axis Capital's ₹6.6 lakh crore estimate without considering the different assumptions behind them.
Axis Capital examines a hypothetical 15% reduction in the government's listed holdings over three years. CII's proposal is based on bringing government ownership down to 51% across a specified group of listed public-sector enterprises.
Both calculations nevertheless point to the same underlying change: rising equity valuations have substantially increased the financial value of the government's listed assets.
Divestment Does Not Necessarily Mean Privatisation
The distinction between selling shares and surrendering control is particularly important when considering the ₹44 lakh crore portfolio.
Divestment can involve selling only a portion of the government's stake. Depending on the size of the sale, the state can remain the majority shareholder and continue to control the enterprise.
Privatisation involves a more fundamental transfer of ownership and control to private investors.
That gives policymakers considerable room to choose different approaches for different companies. Stakes in some enterprises could be reduced to improve market liquidity and raise funds, while the government could maintain controlling positions where it considers them strategically necessary.
The ₹44 lakh crore figure therefore should not be interpreted as a pool of assets waiting to be sold.
Its significance lies elsewhere. Years of rising market valuations have created a much larger financial asset on the government's balance sheet. Even partial monetisation could generate meaningful receipts, expand the supply of investable shares and reshape ownership in parts of India's public sector without requiring wholesale privatisation.
