In October, I highlighted the likelihood of the Nifty 50 generating approximately 18 per cent returns over the subsequent 12 months. I reiterated this view in November, underscoring that the bulls had returned with conviction. Since the October outlook, the Nifty 50 has already risen by 6.5 per cent. Encouragingly, the momentum built during October and November appears sustainable. A number of earlier headwinds have now begun to convert into tailwinds, offering greater clarity and confidence for the next phase of the bull run.
Over the past month, U.S. President Donald Trump has refrained from making negative statements against India. In fact, he has softened his stance on tariffs by reducing duties on tea, coffee, and other agricultural inputs in an effort to reduce price pressures on U.S. consumers. At the same time, the tariff structure itself is under judicial review by the Supreme Court. Based on recent observations from the bench, it appears the legal footing of the tariff may be weak. A reversal of these tariffs would offer significant relief to the global economy, including India. Trump had earlier announced that every U.S. citizen would receive $2,000 from the tariff windfall by mid-2026. Subsequently, he suggested the possibility of eliminating income tax altogether. Given that tariff proceeds may not be sufficient to finance even one of these promises, let alone both, these statements appear to be politically motivated rather than fiscally feasible, likely intended to counter his sliding popularity ratings.
The U.S. equity markets have corrected, primarily due to concerns around excessive valuation in AI-linked stocks. Nvidia, for instance, has declined by 10 per cent over the past month. However, a more persistent worry in the global financial landscape has been the unwinding of the yen carry trade. Our analysis suggests that the yen carry trade does not pose any structural risk to either U.S. or Indian equities. The estimated size of the trade is around $250 billion. With the U.S. equity market capitalisation at $67 trillion, and with a significant proportion of yen carry money allocated to assets such as Bitcoin and bullion rather than equities alone, its market impact is limited. This is despite the U.S. Federal Reserve is expected to cut rates by 25 bps and the Bank of Japan is expected to increase rates by 25 bps — thereby narrowing the yield differential – the yen carry trade remains unlikely to trigger systemic disruption.
In India, yen carry exposure is estimated at $5-7 billion, versus a domestic market capitalisation exceeding $5 trillion, further reinforcing the view that the Indian market is not materially vulnerable to yen carry-driven flows. It is believed that most yen-funded exposure in India is concentrated in mid- and small-cap segments rather than in frontline indices.
Another constructive global development is the possibility of a ceasefire between Russia and Ukraine. Negotiations across multiple stakeholders continue with the objective of concluding a conflict that has persisted for 3 years. An eventual settlement could lead to the easing of tariffs and sanctions on Russia, indirectly reducing trade-related pressure on India. Notably, institutions such as JP Morgan have projected that crude oil prices could decline to around $30 per barrel if geopolitical tensions subside meaningfully. Such a fall would materially reduce India’s crude import bill-potentially by nearly 60 per cent-creating fiscal room for greater capex and welfare expenditure. A lower crude basket would also reduce pressure on the Indian rupee.
Despite being labelled a “dead economy” by Trump, India has demonstrated remarkable economic resilience through the tariff-dominated global landscape. India’s second-quarter GDP growth came in at 8.2 per cent, significantly ahead of expectations. This economic tailwind should support further reforms by the government and reinforce India’s attractiveness to foreign portfolio investors. Additionally, September quarter corporate earnings pleasantly surprised markets, with India Inc reporting net profit growth of 16 per cent. Encouragingly, the second half of the fiscal year appears even more promising, reducing concerns around sluggish earnings momentum.
With steep corrections in speculative assets such as Bitcoin and silver and gold no longer revisiting all-time highs on daily basis – incremental capital is now likely to rotate back into the Indian equity market. Retail flows remained muted in 2025, with direct equity investments totalling only ₹7,185 crore through October compared to ₹1.65 lakh crore in 2024. As overall sentiment improves, retail participation is expected to accelerate. The Nifty and Sensex have already reached new all-time highs, while NSE cash segment volumes have once again crossed ₹1 lakh crore. India’s total market capitalisation has returned to levels last seen in September 2024. We appear close to a phase where retail investors could again deploy at least ₹5,000 crore per month consistently.
With India outperforming the United States for the second consecutive month, the momentum clearly tilts in favour of Indian equities. As we enter the final month of 2025 – a year that has undeniably tested investor patience – market fundamentals and flows point toward a much more encouraging conclusion. Ultimately, it reinforces the adage: all is well that ends well.