2025: A Year of Reckoning for India's Internet Stocks Amid Consolidation

India's internet stocks experienced a year of consolidation in 2025. Morgan Stanley highlighted slower funding, earnings pressure, and shifting investor sentiment. Despite a dip in startup funding and cautious investor behavior, sectors like fintech showed resilience. Market efficiency and investor confidence are anticipated to rebound post-earnings stabilization.

In 2025, India's internet stocks navigated a challenging year marked by consolidation, as highlighted by Morgan Stanley Research. Investors are wary, awaiting the completion of an earnings downgrade cycle before regaining confidence. The sector grappled with slower funding and a palpable shift in investor sentiment.

Morgan Stanley's report painted a picture of 2025 as a period of consolidation for India's internet landscape. Startup funding saw a decline, dipping to USD 7.6 billion—down 9% year-on-year. This slump in funding reflects a cautious investor environment amid global economic uncertainties and tightening capital availability.

India's market slowdown necessitated a strategic shift. Companies focused on profitability, cost control, and sustainable growth, moving away from aggressive expansion strategies. Despite the slowdown, active funding persisted in digital commerce, financial technology, and enterprise-focused tech sectors. Notably, fintech was the sole sector to witness a rise in funding.

Market reactions mirrored this consolidation phase, with internet-focused stocks experiencing corrections and limited yearly returns. Morgan Stanley observed that many firms faced continued earnings downgrades due to intense competition, escalating marketing costs, and regulatory challenges.

Meanwhile, user behavior trends underscored this consolidation trend. Select platforms in payments and financial apps saw improved user engagement, while in quick commerce, the market condensed to fewer key players. This transformation signifies a maturing market where efficiency surpasses mere scale.

Looking ahead, investors are poised for clearer signs of recovery. Morgan Stanley suggests confidence may resurge once earnings stabilize and visibility improves, potentially rejuvenating interest in the internet stocks sector.

(With inputs from agencies.)