Markets concluded calendar year 2025 with modest gains but emerged as the worst-performing major market globally in dollar terms, as record foreign outflows and sharp rupee depreciation overshadowed domestic buying support.
Foreign institutional investors pulled out a record of over $18 billion (approximately ₹1,66,286 crore net) from Indian equities in 2025, surpassing the previous high of ₹1,21,439 crore in 2022, according to NSDL data.
The BSE Sensex closed the year with gains of approximately 8.5 per cent, while the Nifty 50 rose around 10 per cent in rupee terms.
However, a 5 per cent depreciation in the Indian rupee — Asia’s worst-performing currency in 2025—reduced dollar returns to just 4-5 per cent, placing India at the bottom of the global league table. While Nifty Midcap eked out a marginal gain of 4 per cent, Nifty SmallCap index slipped nearly 6 per cent.
For the 10th consecutive year, Nifty and Sensex maintained their winning streak since both indices closed in the red in 2015.
Global markets
In contrast, South Korea’s Kospi soared nearly 76 per cent, Brazil’s Bovespa jumped 34 per cent, Germany’s DAX rose 22 per cent, FTSE edged up 20 per cent and the Stoxx Europe 600 climbed 16 per cent. The US markets also outperformed, led by AI stocks, with the S&P 500 and Nasdaq gaining 14 per cent and 22 per cent respectively.
Even neighbours, Pakistan and Sri Lankan stocks, gave stellar returns. Only trouble-prone Russia and Bangladesh stocks underperformed the Indian market, while CAC’s produced a return on par with that of India.
“As the year 2025 draws to a close, FII selling in India is on track to set a new record in FII outflows,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd. “This is the worst selling by FIIs since they started investing in India,” Vijayakumar noted.
Domestic support
Despite the exodus, domestic institutional investors and retail participation through systematic investment plans provided crucial support. SIP contributions surged to ₹566 billion in H1 FY26, with active SIP accounts rising to 179 million, according to the Geojit Market Strategy 2026 report.
On Wednesday, the final trading day of 2025, benchmark indices rebounded sharply. “Benchmark indices rebounded, snapping a four-session losing streak, as bargain buying emerged after the recent decline and sentiment improved on strong sector-specific cues,” said Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services.
The Nifty ended higher by 0.7 per cent or 190 points, while the Nifty Midcap 100 and Nifty Smallcap 100 both gained 1 per cent and 1.1 per cent, respectively.
Among sectors ‒ Metals, Auto and Bank were the top performers while Media, Realty and IT underperformed in 2025.
India enters 2026 with supportive monetary-fiscal alignment, improving consumption visibility, and stable external balances, said Mirae Asset Mutual Fund in a note. “The earnings downgrade cycle appears to be largely behind us. The cavalry of measures by the government will help to reset the trajectory of corporate earnings as domestic reforms are expected to continue, while any resolution of the tariff stalemate will be a key external catalyst for the markets,” the report said.
Currency Pressure
The rupee crisis deepened through the year, with the currency breaching the psychological 90-per-dollar mark in early December and touching historic lows of 91.07-91.14 by mid-month. “The Indian rupee weakened past 90/$, hitting another fresh record low, pressured by corporate dollar outflows, which added to concerns over the absence of a US-India trade deal,” said Jigar Trivedi, Senior Research Analyst at Reliance Securities. The currency closed at 89.88 on Wednesday.
Sectoral performance remained divergent. “Large-caps, led first by banks and heavyweight IT names, outperformed and were later joined by Consumer names as the GST cut-related spending revival began to take shape,” noted Prateek Nigudkar, Senior Fund Manager at Shriram AMC. The Nifty PSU Bank index led with 25.6 per cent gains, while the Nifty Metal rose 21 per cent. However, Nifty Media declined 21 per cent, and Nifty IT fell 12.2 per cent.
Commodity Split
Commodities told a different story. Gold and silver emerged as top-performing assets in 2025, driven by USD depreciation and geopolitical tensions. Crude oil, however, posted negative returns of 17 per cent. “Rising supply concerns, a fading geopolitical risk premium, a weak demand outlook, and persistent economic uncertainty kept crude prices under pressure in 2025,” said Navneet Damani, Head of Research, Commodities at Motilal Oswal.
Looking ahead, market experts remain cautiously optimistic. “As we transition into 2026, the Indian market is moving from 15 months of sideways consolidation into a phase of fundamental, earnings-led optimism,” said Rahul Singh, CIO-Equities at Tata Asset Management. Geojit Research upgraded its Nifty 50 base target for December 2026 to 29,150, suggesting 12 per cent returns.
“After a phase of consolidation in 2025, we expect markets to deliver steady growth in 2026, supported by a recovery in corporate earnings, a gradual revival in private sector investment and support from recent and forthcoming government policy measures,” said Khemka. Near-term markets are expected to remain range-bound with thin trading volumes due to the New Year holidays across global markets.