Indian stock market: Over the past year, the have navigated several waves of volatility — FPI outflows, inflation, uncertainty around U.S. tariffs, concerns over slowing global growth, policy divergence among major economies, and elevated domestic valuations.
According to Monthly Market Outlook – Nov 2025 report by ICICI Prudential, the outlook of the now appears to be improving. Corporate earnings are gaining momentum, domestic market volatility has subsided, and policy measures such as GST reforms, income tax reductions, and liquidity support are expected to drive the next phase of growth.
“With the evolving changes, we are now less cautious on equities. However, elevated valuations can limit near-term upside, and prolonged tariff uncertainties could test investor sentiment going forward,” the report said.
Market performance comparison
The report further highlighted that the Indian stock market has remained flattish or in downtrend over the past one year till November’ 2025.
In November 2024, the Nifty 100, Nifty Midcap 150, and Nifty Smallcap 250 recorded strong one-year returns of 31%, 42%, and 45%, respectively, reflecting a robust market rally across segments. This indicates that all three categories—large caps, midcaps, and small caps—performed exceptionally well during that period, likely driven by favourable economic momentum and investor optimism.
However, by November 2025, the situation had changed significantly. The same indices reflected subdued or negative one-year returns, with both Nifty 100 and Nifty Midcap 150 delivering marginal gains of just 3%, while Nifty Smallcap 250 showed a decline of 5%.
Factors behind the plunge in the Indian stock market
Valuations
The ICICI Prudential report further compares valuation trends across three major indices — Nifty 50, BSE Midcap, and BSE Smallcap — based on their median P/E ratios.
Valuations remain elevated, they have moderated from their recent peaks, said the brokerage firm. The Nifty 50 Index’s median P/E rose from around 32.1 in October 2024 to 33.2 in October 2025, reflecting relatively stable large-cap valuations.
The BSE Midcap Index witnessed a notable decline from its peak of 48.8 to 41.6 during the same period, indicating some cooling in midcap valuations.
Similarly, the BSE Smallcap 250 Index fell from 45.3 to 37.7, marking a meaningful moderation after a strong run-up.
Earnings Cycle
The report further said that after a tough phase last year, earnings may recover as policy support strengthens in form of GST, Income tax & interest rate cuts.
The report highlighted the trend in PAT (Profit After Tax) Growth – 3-Year CAGR across recent and upcoming financial quarters. The data revealed a strong profit growth in FY23 and FY24, with PAT CAGR peaking at 47% in Q1FY24 and 48% in Q2FY24, reflecting a robust earnings recovery phase. However, the trend shows a noticeable slowdown in FY25, turning negative at -1% in Q1FY25 and dipping further to -6% in Q2FY25, signaling a challenging period for corporate profitability.
However, the brokerage firm anticipates a gradual recovery thereafter, with PAT growth improving modestly to 4–8% through FY26, and reaching 10% in Q2FY26.
Volatility index
It is to be noted that the Indian stock market has maintained its calm amidst global uncertainties offering some relief to global investors, the firm added.
The report further compares the Global VIX and India VIX from September 2024 to October 2025. The report highlighted that global volatility (Global VIX) experienced significant fluctuations—peaking sharply around March 2025—India’s volatility index remained relatively stable throughout the period.
The Global VIX started at 15.4 in September 2024, surged to nearly 48 during early 2025 amid global uncertainties, and later eased to around 20.0 by October 2025. In contrast, the India VIX moved within a narrow range, rising modestly from 12.0 to 12.4, indicating that Indian stock markets maintained their composure despite heightened global volatility.
FPI Inflows
“After a year’s pause, FPIs are showing renewed interest in Indian equities led by external factors such as a) Over crowding in Korea and Taiwan b) Weak USD along with rate cuts c) US Tariff impacts prove short lived and d) Moderating valuations,” the report said.
The report further illustrated the trend of Foreign Portfolio Investment (FPI) flows in India (in INR crore) from September 2024 to October 2025. The data reveals significant fluctuations during this period. After a strong inflow in September 2024, FPIs witnessed a sharp outflow in October 2024, marking one of the steepest declines.
By October 2025, a renewed uptick in FPI inflows was seen, suggesting revived interest in Indian equities. This recovery is attributed to several factors — overcrowding in Korea and Taiwan, a weaker USD amid rate cuts, the short-lived impact of US tariffs, and moderating valuations — all of which have made India a relatively attractive investment destination once again, according to the brokerage firm.
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