Indian markets end 2025 in the green, but lag global peers

Indian equity markets closed 2025 with gains, extending the Nifty’s winning streak to a tenth consecutive year. However, despite the headline positive return, the year will be remembered more for resilience than outperformance, as Indian equities lagged most global and emerging market peers amid a challenging mix of domestic and global headwinds.

The Nifty ended the year up 10.7%. While the benchmark managed to stay positive, the performance appeared subdued when viewed against the strong rally seen over the past five to six years. In relative terms, 2025 stood out as a weaker year, with India underperforming several major global indices.

Global Turbulence and Domestic Pressures Weigh on Sentiment

Markets spent much of the year navigating heightened uncertainty. The Iran–Israel conflict at the start of 2025 set the tone, followed by domestic disruptions linked to Operation Sindoor. These geopolitical developments were compounded by prolonged uncertainty around US trade policy, marked by President Donald Trump’s tariff actions and a lack of clarity on the India-US trade deal.

At home, the transition to GST 2.0 and muted demand in the first half of the financial year weighed on corporate earnings. Heavy foreign portfolio investor (FPI) selling added further pressure, leading to rupee weakness toward the end of the year. As a result, earnings growth remained subdued and India’s relative market performance suffered.

India Underperforms Global and Emerging Market Indices

While the Nifty rose 10.7%, global markets delivered stronger returns. The Dow Jones gained around 14%, the Nasdaq surged 22%, and China’s markets rebounded sharply with an 18% rise. The MSCI Emerging Markets index climbed nearly 30%, significantly outperforming India.

Several markets delivered exceptional gains, with South Korea’s Kospi and Spain’s benchmark indices rising between 50% and 76%. Against this backdrop, India’s underperformance became increasingly evident.

Currency weakness further eroded returns. The Indian rupee emerged as the weakest-performing currency in Asia in 2025. On a dollar-adjusted basis, the Nifty’s gains narrowed to roughly 5.5%—nearly half the headline return.

Precious Metals Steal the Spotlight

If equities disappointed, precious metals delivered standout performances. Gold and silver emerged as the biggest winners of the year, aided by global uncertainty and currency depreciation. Silver, in particular, recorded a historic rally, rising over 160%—its strongest performance since the early 1970s. In rupee-adjusted terms, both metals significantly outperformed equities, making 2025 more of a precious metals year than an equity bull run.

Flows Tell a Contrasting Story

Despite weak equity performance, investor behaviour remained mixed. FPIs pulled out a record $34 billion from Indian equities during the year. In contrast, the primary market saw robust activity, with around $22 billion raised through IPOs, largely via offers for sale—one of the highest totals on record.

Domestic investors continued to play a stabilising role. Systematic Investment Plan (SIP) inflows averaged nearly $3 billion a month, providing steady support and helping the benchmark indices stay in positive territory.

Sectoral Winners and Losers

Sectoral trends were sharply divergent. PSU banks, metals, and auto stocks emerged as clear winners in 2025. On the other hand, IT and real estate stocks struggled. The IT sector faced headwinds from global uncertainty and a redirection of capital towards artificial intelligence, while real estate lagged amid demand concerns.

Broader Markets Fail to Deliver

The broader market also had a difficult year. The Nifty Smallcap index fell 6%, while the Midcap index rose about 5%. However, market breadth remained weak. Across BSE 500 stocks, the median return was negative 5%, with more stocks declining than advancing during the year.

Stock-Specific Extremes Define the Year

Among frontline stocks, only a handful delivered strong returns. Maruti Suzuki and Eicher Motors gained over 50%, while Shriram Finance

stood out, aided by a late-year capital infusion from MUFG. Hindalco and Bajaj Finance also posted notable gains.

On the downside, IT majors such as Infosys, TCS, and HCL Tech featured among the laggards. Trent, after strong gains in previous years, fell nearly 41% in 2025, marking one of the sharpest declines among index heavyweights.

In the broader market, stocks such as L&T Finance, Hindustan Copper, AB Capital, RBL Bank, and Laurus Labs delivered strong returns. Conversely, previously high-flying EMS players disappointed, with Kaynes Technology, PG Electroplast, and Dixon Technologies declining between 35% and 50% as valuations corrected and growth slowed. Whirlpool also suffered amid promoter stake sale concerns, nearly halving investor wealth over the year.

At the extremes, several lesser-known names posted extraordinary gains. Cupid surged nearly 600%, while Shukra Pharma and Cian Agro also recorded sharp rallies.

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Looking Ahead to 2026

As markets head into 2026, investors are watching several key triggers. A potential US–India trade deal could provide a meaningful boost. Another critical factor will be a recovery in corporate earnings, which appears plausible given recent government measures.

A reversal in FII flows, which remained negative for much of 2025, could also change market dynamics. Meanwhile, the IPO pipeline remains crowded, with companies such as Reliance Jio, OYO, and Zepto, along with several new-age and traditional firms, expected to tap the markets.

Global interest rate movements and commodity prices will continue to shape sentiment in the year ahead.

For investors, 2025 delivered a clear reminder: market success was less about tactical brilliance and more about patience and staying invested through volatility.