How did Indian markets behave vis-à-vis its global peers? Which sector did well and who didn’t?
Dated 19.12.2025 : In 2025, the Indian market followed a path of strong fundamental growth but moderate equity returns, often underperforming global peers in percentage terms. While the U.S., Japan, and Europe saw rallies driven by specific tech or currency factors, India’s year was defined by its resilience against external “shocks” and a massive shift in how the market is funded.
India vs. World Markets: 2025 Performance
As of late 2025, the Nifty 50 has delivered a year-to-date return of approximately 9–10%. While respectable, this trailed behind markets like Japan (+24%) and the UK (+20%).
| Metric | India (Nifty 50) | USA (S&P 500) | Japan (Nikkei 225) | China (CSI 300) |
| 2025 Return | ~9–10% | ~14–16% | ~24% | ~16% |
| GDP Growth | ~6.6–7.0% | ~2.0% | ~1.1% | ~4.8% |
| Volatility (VIX) | Low (~9.7) | Moderate | High | High |
The “Tariff Crisis” Resilience
The defining moment for India in 2025 was the “Liberation Day Drop” in April, followed by a massive 50% tariff imposed by the U.S. in August (linked to trade deficits and Russian oil imports).
- Global Reaction: Most major markets took 14 to 27 days to recover from the initial trade shocks.
- Indian Resilience: The Indian market “shrugged off” the news, recovering in just 6 trading days.
Sector Divergence: While textiles and gems & jewellery were hit hard, the Nifty Pharma and IT Services sectors acted as “defensive shields,” actually gaining value as they were largely exempted from the harshest trade penalties.
The Great Capital Rotation: FIIs vs. DIIs
2025 was a historic year for Indian capital flows, marking a fundamental shift in market power:
- Worst FII Year on Record: Foreign Institutional Investors (FIIs) sold a record ₹1.6 lakh crore ($19B+) of Indian equities. India became a “funding source” for the global AI boom, with foreign money moving to Taiwan and South Korea.
- The DII Cushion: Domestic Institutional Investors (DIIs) and retail SIPs (Systematic Investment Plans) completely absorbed this selling. This domestic “wall of money” prevented a market crash, keeping the Nifty stable even as foreign ownership hit a 15-year low (~16.9%).
Key Domestic Drivers
- Infrastructure & Defense: The standout sectors were linked to “Atmanirbhar Bharat.” Deep-tech defense companies and infrastructure firms saw multibagger returns (some over 1,000%) due to massive government contracts.
- Inflation Success: India achieved one of the lowest inflation rates in its modern history, with CPI hitting a low of 0.25% in October 2025. This gave the RBI room to manage the Rupee (which hovered near 88.7 to the USD) without aggressive rate hikes.
Market Cap Milestone: India firmly held its spot as the fifth-largest stock market in the world, surpassing UK, France, and Germany in total valuation.
Which sectors outperformed and underperformed in 2025?
In 2025, the Indian market witnessed a “K-shaped” sectoral recovery. While the headline indices remained relatively stable, specific sectors like PSU Banks and Defense saw explosive growth, while formerly “safe” sectors like IT and Real Estate faced significant corrections.
The Top Performers (Winners)
These sectors drove the majority of the market’s positive sentiment, fueled by domestic policy and strong balance sheets.
| Sector | YTD Return (approx.) | Key Drivers |
| PSU Banks | +24% to +31% | A massive “valuation re-rating.” Stocks like Indian Bank (+68%) and Canara Bank (+50%) led the charge due to cleaned-up balance sheets and record-high credit growth. |
| Defense | +24% | Fueled by the “Atmanirbhar Bharat” push and a government target for ₹50,000 crore in exports by 2029. Garden Reach (+71%) and MTAR (+56%) were standout performers. |
| Automobiles | +15% to +22% | A revival in rural demand and a GST rate cut for several categories boosted volumes. Two-wheelers (TVS, Hero MotoCorp) were the biggest gainers within the sector. |
| Fintech & NBFCs | +17% to +19% | Non-banking financial companies outperformed traditional private banks. Companies like L&T Finance and Aditya Birla Capital saw near-doubling in stock prices. |
The Underperformers (Losers)
These sectors struggled as global macro headwinds and domestic affordability issues weighed on investor appetite.
1. Information Technology (IT) — Down 13%
Despite the global AI hype, Indian IT faced a “reality check.”
- The Issue: AI investments remained in the “pilot” stage and didn’t translate to immediate revenue.
- Key Laggards: Heavyweights like TCS (-24%), Wipro (-17%), and Oracle Financial Services (-36%) fell as global clients cut back on discretionary spending.
2. Real Estate — Down 15%
After a multi-year boom, the sector hit a wall in 2025.
- The Issue: A 61% plunge in new project launches and surging property prices hurt affordability.
- Key Laggards: Oberoi Realty (-39%) and Anant Raj (-33%) were among the hardest hit.
3. Media — Down 19%
This was the worst-performing sectoral index of the year, struggling with a shift in advertising spend toward digital platforms and a lack of major “hit” content cycles for traditional broadcasters.
The “Middle Ground” (Mixed Performance)
- Pharma & Healthcare (+13%): Performed as a “safe haven” during the April trade shocks. While generic manufacturers were stable, hospitals like Max Healthcare saw gains of nearly 15%.
- FMCG (-1% to +5%): Remained essentially flat. While urban demand for premium products (like Godrej Consumer) stayed strong, mass-market brands like Colgate-Palmolive and Hindustan Unilever struggled with slow volume growth in rural areas.
Summary Trend: 2025 was the year of “Value over Growth.” Investors dumped high-multiple tech and real estate stocks and moved into “boring” but profitable sectors like Public Sector Banks and Manufacturing
This article is for informational purposes only. It summarizes updates from publicly available sources and AI-generated insights. We are not SEBI-registered investment advisors, and this content does not constitute investment advice
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