Indian equity investors would likely want to put 2025 behind them as quickly as possible. The year opened on a negative note, with the emergence of the HMPV virus triggering global uncertainty and panic, followed by the imposition of US tariffs on India. Despite government efforts to revive sentiment—such as income tax and GST relief—and the RBI cutting rates by 125 bps (a sharp contrast to 2024, when no rate cuts were delivered despite a 100 bps reduction by the US Fed), market confidence remained weak.

Global markets, however, told a very different story. Despite a downgrade of the US credit rating, persistently high inflation, and the longest-ever 43-day government shutdown, US equity markets delivered an exceptionally strong performance. Bitcoin, which surged early in the year on optimism surrounding a pro-cryptocurrency US president, gave up those gains in the final quarter.

In contrast, gold and silver emerged as clear outperformers, scaling new all-time highs in 2025. Just a few years ago, many commentators had written off precious metals as an investment class following the rise of cryptocurrencies—an assumption that proved premature.

On the corporate front, NVIDIA created history by becoming the world’s first company to cross a USD 5 trillion market capitalisation. While concerns over an AI-driven valuation bubble tempered momentum later in the year, the stock still delivered strong returns in 2025.

Geopolitical risks remained elevated throughout the year. The Russia–Ukraine conflict continued to intensify, while tensions between Israel and Hamas flared before subsiding later in 2025. In the final quarter, relations deteriorated between Japan and China, as well as Thailand and Cambodia. Closer to home, India faced a mini war-like situation with Pakistan following a terrorist attack on tourists in Jammu & Kashmir. Interestingly, despite these heightened geopolitical tensions, crude oil prices remained soft for most of the year.

Domestically, the Indian rupee depreciated far more sharply than anticipated, hitting all-time lows. Foreign portfolio investors (FPIs) were persistent sellers, exceeding market expectations and recording net selling in Indian equities. Large-cap stocks showed relative resilience, while mid- and small-cap segments remained under sustained pressure for most of the year. Corporate earnings were largely muted, although the September quarter did show signs of recovery.

As a result, Indian equity markets delivered muted returns in 2025. The Nifty 50 gained 10.7%, mid-cap stocks delivered flat returns, and small-cap stocks declined by 6.6%. The advance–decline ratio for the BSE 500 reflected broader market weakness, with declines outweighing advances.

We had cautioned investors well in advance that 2025 would be a challenging year. As written in January 2025:

“The exceptional returns of the past few years have elevated investor expectations, with many anticipating a 25% annual return as the new normal. However, 2025 is likely to challenge this assumption. Over the last five years, the mid-cap index delivered a CAGR of 25.4%, and the small-cap index achieved a remarkable 32% CAGR. With earnings growth failing to keep pace, valuations in these segments have become stretched, limiting further upside potential. Large-cap stocks, on the other hand, appear better positioned. Despite nine consecutive calendar years of positive returns for the Nifty 50, there are no signs of a bubble. The Nifty’s 10-year CAGR of 12.9% reflects a relatively subdued rally. Current valuations are lower than historical averages, creating room for potential upside. We believe that Nifty will stretch its rally into 10th year. In 2025, large-cap stocks could outperform mid- and small-caps. However, the rally may not be as broad-based as in previous years, making stock selection critically important.”

The year also shattered several widely held beliefs. Despite a US credit rating downgrade, inflation remaining above the Fed’s comfort zone, and an unprecedented government shutdown, US markets closed in the green. Conversely, Indian markets struggled despite lower inflation, government reforms, and softer crude oil prices. Similarly, predictions that gold and silver had no future post-cryptocurrencies—and that crude oil prices would spike amid geopolitical turmoil—proved inaccurate.

Equity markets do not move in straight lines or follow simple equations. Outcomes are shaped by a complex interplay of multiple variables, making certainty elusive. Over time, market dynamics have only become more nuanced, with sentiment influenced by an expanding set of global and domestic factors investors’

I will soon be sharing my outlook for the equity markets in 2026—please watch this space.

On behalf of every member of the Markets Mojo family, I wish you a happy, healthy, and prosperous 2026.