The NSE Nifty 50 Index posted its biggest annual underperformance to the region since 1998. The benchmark index rose 0.7% on Wednesday but registered its first monthly loss since August.
“2025 wasn’t an easy year for Indian capital markets,” Pranav Haridasan, chief executive officer at Axis Securities, said in an emailed statement. “A challenging 2025 may well have set the stage for a steadier and potentially mean-reverting year ahead.”
On the positive side, India’s stock market posted a record 10th straight year of gains, joining Japan and Argentina in a rare global club. Strong demand from local institutions — which have poured about $81 billion into equities in 2025 — has been instrumental in underpinning returns of over 10% this year.
Strategists from Nomura Holdings Inc. and Citigroup Inc. expect Indian equities to post further gains in 2026 and potentially outperform their emerging-market peers, provided corporate earnings continue to improve and policy measures aimed at supporting domestic demand gain traction.
Still, the near-term outlook for Indian assets remains clouded. Local stocks rarely start the year on a strong footing, with the Nifty 50 Index losing an average 1.1% in January, according to data compiled by Bloomberg.
The booming market for initial public offerings is also set to continue diverting liquidity toward new listings after a record year in 2025, Kotak Mahindra Capital Co. and Goldman Sachs Group Inc. both forecast IPO proceeds to exceed $25 billion next year.
