Market expert Jimeet Modi has raised concerns about the increasing concentration of Indian markets into duopolies, where two dominant players control the majority of market share across multiple sectors. The SAMCO Group founder warns that this structural shift may pose significant risks for both investors and consumers.

Aviation Sector Leads Duopoly Formation

The aviation industry exemplifies this trend most clearly, with IndiGo and Air India together reportedly controlling nearly 90% of the domestic market. This represents a dramatic shift from two decades ago when multiple carriers including Jet Airways, Indian Airlines, Kingfisher, and Sahara competed actively for market share.

Government Response to Market Concentration

Recognizing the potential structural risks, the government has reportedly approved new airline entrants to dilute the aviation duopoly. The regulatory approvals include:

• Al Hind Air: Cleared for operations
• FlyExpress: Approved as new entrant
• Shankh Air: Preparing for launch

These approvals may represent a deliberate policy intervention rather than routine licensing, potentially reflecting growing regulatory concern about market concentration reaching critical levels.

Duopoly Trends Beyond Aviation

Modi's analysis extends beyond aviation to highlight similar patterns across the Indian economy. The food delivery market reportedly sees Zomato and Swiggy controlling approximately 95% of deliveries, while digital payments are dominated by PhonePe and Google Pay with over 80% market share. The telecommunications sector has also consolidated around Jio and Airtel as primary players.

The expert argues that such concentration could fundamentally change market dynamics, potentially shifting from competitive pricing and innovation to what economists term "tacit coordination" between dominant players.

Investment and Policy Implications

For investors, Modi suggests that while duopolies may appear attractive short-term due to stable cash flows and reduced volatility, they could pose long-term risks to value creation. The analysis emphasizes that healthy market ecosystems may require contestability - the constant threat of disruption from smaller competitors.

The regulatory response in aviation indicates policymakers may understand that markets rarely self-correct once concentration hardens, potentially requiring intervention before dominance becomes entrenched. Whether new entrants can successfully challenge established duopolies remains uncertain, given aviation's capital intensity and thin margins.

Market Structure Concerns

The analysis warns that when market power concentrates to 70-90% levels, competition could become "performative" rather than genuine. This shift may lead to higher prices, reduced innovation, and deteriorating service quality over time, as dominant players focus on market management rather than customer acquisition.

Modi concludes that India's growth story may depend on maintaining broad opportunity and deep markets rather than narrow concentrations of power, emphasizing the need for continued vigilance regarding duopoly formation across sectors.

The growing duopoly concentration across Indian sectors, from aviation to digital payments, highlights potential structural risks for investors and consumers as two-player dominance reaches 70-90% market share in various industries. This trend underscores the importance of regulatory oversight and market diversification to maintain healthy competition and economic growth in India.

Indian equity markets are experiencing an unprecedented divergence between headline performance and underlying market health. While benchmark indices trade near record levels, a deeper analysis reveals significant stress across the broader market spectrum.

Market Polarisation Reaches Critical Levels

The current market environment presents a stark contrast between surface-level strength and underlying weakness. From a universe of 1,518 listed companies with market capitalisation exceeding ₹1,000 crores, the drawdown statistics paint a concerning picture:

This polarisation has left portfolios under pressure despite the Nifty's resilience. When compared to global markets, India ranks near the bottom among developed and emerging markets for 2025 performance, with indices still hovering around September 2024 levels.

Strong Macro Fundamentals Support 2026 Outlook

Despite current market challenges, India enters 2026 with robust macroeconomic foundations. The economy demonstrates solid GDP growth, controlled inflation levels, and strong domestic consumption supported by policy measures including GST rate cuts. Corporate earnings are expected to witness double-digit expansion both globally and domestically, providing support for current market valuations.

The combination of improving earnings visibility and strong domestic demand creates a favourable backdrop for market recovery. This earnings growth, projected at 10-15% for FY26-27, should serve as the primary trigger for market advancement.

Currency Pressures and Global Dynamics

The rupee's decline beyond ₹85 against the dollar reflects multiple pressures. India's heavy reliance on crude oil imports creates consistent dollar demand, while the widening trade deficit adds further pressure. Foreign investor outflows toward attractive markets like the US, driven by AI sector growth and higher interest rates, have intensified currency weakness.

However, India's strong macroeconomic fundamentals provide significant buffers. Foreign exchange reserves of approximately ₹690 billion, healthy GDP growth, and robust services exports offer protection against extreme depreciation.

Sector Leadership for 2026

Several sectors are positioned to lead the market rally based on earnings recovery and strong domestic demand:

Key Growth Sectors:

• Financials: Rising credit growth, improved asset quality, and margin expansion
• Automotive: Strong demand across mass-market and premium segments
• Infrastructure & Capital Goods: Government focus on roads, railways, and power projects
• Healthcare: Multi-year visibility from increased public spending and insurance penetration
• Consumer Discretionary: Revival in consumption demand supported by lower input costs

The infrastructure sector particularly benefits from significant government capital expenditure, leading to strong order books and visible earnings growth for companies in this space.

IPO Market Momentum Continues

The IPO market achieved a significant milestone with over 100 mainboard offerings raising nearly ₹2 lakh crores. Looking ahead, over 190 companies are in various IPO process stages, collectively targeting potential fundraising exceeding ₹2.5 lakh crores.

Expected IPO sectors for 2026 include technology (fintech, e-commerce), financial services, manufacturing, infrastructure, and healthcare. Strong domestic institutional and retail investor inflows have created substantial capital pools to absorb large issues, though the market is expected to mature with greater focus on fundamentals and realistic valuations.

Key Market Triggers Ahead

Several factors will drive equity market performance in 2026. Corporate earnings acceleration remains the primary catalyst, supported by recovering demand, infrastructure spending, and credit growth. Global factors including AI sector developments, central bank rate cuts, and geopolitical dynamics will continue influencing market direction.

A potential correction in US AI stocks could trigger Foreign Institutional Investor re-investment in India, reversing 2025 outflows. The market's reduced reliance on external capital, supported by strong domestic liquidity, provides a foundation for sustained growth despite global uncertainties.