Why are hospital stocks defying market volatility? Demand, beds and growth plans

In times of geopolitical unrest and volatile markets, the hospital segment has shown resilience, outperforming broader equities. Strong operating metrics, capacity expansion, new facilities, and steady healthcare demand have supported its performance.

In the first quarter of 2026, 11 listed hospital companies delivered an equal-weighted return of -8%, outperforming the Nifty 500 Equal Weight Index’s -14.4% fall. Eight of the 11 companies beat the benchmark, highlighting the segment’s relative strength.

Over the past five years, the sector has delivered strong growth, with revenues rising about 15.5% annually between FY2019-20 and FY2024-25, while EBITDA (Earnings before interest, taxes, depreciation and amortization) grew faster at around 25%. This was driven by higher insurance-led payments ensuring steadier revenues, strong demand for profitable inpatient care, and aggressive expansion in beds and facilities.


While tensions in West Asia may create short-term challenges, the medium- to long-term outlook remains strong. Sneha Poddar, VP–Research at Motilal Oswal Financial Services, continues to maintain a constructive view on the hospital sector. She cautions that near-term profitability could be pressured by new capacity additions, but overall revenue growth should remain robust. Poddar also highlights medical tourism as a key structural driver. Although current geopolitical issues have slowed this, it is expected to remain a major growth catalyst in the future.

India lags on healthcare manpower
Healthcare sector is heavily underpenetrated in India.

High-value care drives hospital revenue
Rising share (%) of specialty treatments to improve performance metrics.

Q4 FY26 performance

Analysts expect hospitals to report steady performance. Average revenue per patient is likely to improve, supported by a better payor mix and steady occupancy levels. Hospitals are also focusing on operational efficiencies— reducing the average length of stay (ALOS), adopting digital tools, and enhancing processes—all of which should help profitability.

Long-term outlook

The sector is facing a demand-supply mismatch. Past capacity additions have not kept pace with rising demand. India’s national bed density stands at 16 beds per 10,000 population as of FY2024-25, which is less than half the global average of 33 beds per 10,000 population, according to data compiled from a recent Equirus report. With population growth, urbanisation, and rising disease burden, the demand for hospital services is increasing. Equirus expects the sector to deliver 18- 20% revenue CAGR (Compounded Annual Growth Rate). over the next 3-4 years. Key growth drivers include annual price hikes, strong demand in specialities such as cardiology, oncology, neuroscience, gastroenterology, and orthopaedics, a continued shift toward insurance in the payor mix, and revisions to CGHS (Central Government Health Scheme) surgical packages.

Over 23,000 new beds are likely to be added across the sector in the next 3-4 years. However, margin trends may vary depending on expansion strategies. Companies pursuing greenfield expansion (building new hospitals from scratch) may face margin pressure in FY26 and FY27, while those focusing on brownfield expansion (adding capacity to existing facilities) are expected to enjoy better margins in the near term.

Despite these expansions, the credit profiles of hospital companies are expected to remain strong. A CRISIL note released in February 2026 points out that strong internal accruals will finance much of the spending, reducing reliance on external borrowings. This ensures that credit profiles remain healthy. CRISIL also highlights other growth levers, including GST (Goods & Services Tax) exemption on health insurance premiums, rising demand for complex, high-value treatments, faster ramp-up of new facilities, and operating leverage.

Analysts advise retail investors to adopt a staggered investment approach. Poddar suggests gradually accumulating hospital stocks with a 2-3-year investment horizon to realise meaningful returns. Here is how the three hospital stocks with the most buy ratings on Bloomberg are placed.

Varun Gupta, CEO of Groww Mutual Fund, is structurally positive on the hospital segment over the long term, but flags key risks for investors. He points out that the sector is vulnerable to delays in capacity additions, slower occupancy ramp-ups, and potential cost overruns. Additionally, regulatory changes—such as pricing controls, treatment caps, or shifts in insurance policies— can adversely affect revenue realisations and margins.

Apollo Hospitals Enterprise

• Expected revenue growth of 17.4% year-on-year in the March 2026 quarter (Bloomberg consensus).
• Operating leverage to support performance Benefits from a 3% tariff increase in December 2025 will continue to accrue.
• Plans to add over 2,800 beds between FY27 and FY29.
• Focus areas include cost control and higher inpatient volumes.

Max Healthcare Institute

• Expected revenue growth of 16% year-on- year in the March 2026 quarter (Motilal Oswal estimates).
• Performance will be aided by the normalisation of cashless insurance disruptions and the ramp-up of brownfield bed additions at Nanavati Max and Max Mohali.
• Revenue mix remains balanced, with growth across institutional and international patient segments.
• Management plans to add 1,700 beds over the next two years.
• EBITDA margins are expected to remain in the 25-27% range, with revenue growth around 15%.

Krishna Institute of Medical Sciences

• Expected revenue growth of 32.9% year-on-year in the March 2026 quarter (Bloomberg consensus).
• Performance supported by new bed additions and improved payor mix.
• New hospitals are expected to break even in the next 2–3 quarters, boosting operating profitability.
• Higher average revenue per occupied bed at new locations, aided by better payor mix and higher case complexity, is supporting both revenue and margins.
• Management aims to add around 1150 beds over FY27 and FY28 through brownfield expansions in Telangana and Andhra Pradesh.
• Equirus expects margins to recover to 26.2%, while ROCE (return on capital employed) could improve by around 1,000 basis points to 22% between FY26 and FY28.