Indian Internet Stocks Fall Amid Profitability Concerns
Indian internet stocks, including major fintech and D2C companies, have fallen by as much as 28% in 2026 as investors increase pressure for clear paths to profitability. Brokerages have warned against high cash burn and undisciplined expansion, signaling a market shift towards sustainable unit economics.
- The market downturn has not spared even companies showing strong financial growth; Zomato's parent company, Eternal, reported a 202% year-on-year revenue jump and a 73% surge in profit in Q3, yet its stock remained flat for 2026 on a year-to-date basis. Similarly, PB Fintech (Policybazaar) saw its profit soar 164% in the same period, but its stock fell 18% YTD. - Several major internet companies recently achieved significant profitability milestones, but this has not been enough to satisfy investors. Paytm, for instance, reported a profit of ₹225 crore in Q3 FY26, a major turnaround from a ₹208 crore loss the previous year, yet its stock was down 8% for the year. Nykaa also saw a 142% rise in profit, but its stock has only returned 3% in 2026. - The sell-off is more pronounced for companies still struggling with financial performance. Swiggy and FirstCry continued to report widening losses, while Nazara Technologies saw a 37% drop in profit, and Just Dial's profit fell 10% in Q3. - This cooling sentiment extends to the primary markets, creating a more challenging environment for new listings. The IPO market has slowed in early 2026, with many companies trading below their issue prices amid weaker retail investor demand and heightened market volatility. - Investor focus has decisively shifted from prioritizing growth and total addressable market (TAM) to demanding a clear and sustainable path to profitability. Venture capitalists and public market investors are now scrutinizing unit economics, cash burn, and margin stability far more intensely than in previous years. - For D2C companies, the pressure stems from a pre-existing "unit economics crisis." By 2025, customer acquisition costs (CAC) for Indian D2C brands had nearly tripled since 2021, with estimates showing over two-thirds of brands were losing money on every sale. - The market's risk appetite will be further tested by a massive pipeline of upcoming tech IPOs. Companies including PhonePe, Zepto, and Oyo are targeting to raise nearly ₹50,000 crore in 2026, placing further scrutiny on valuations and business models.
