India’s equity markets underperformed significantly compared with global counterparts in 2025, even though major domestic benchmarks such as the BSE Sensex and NSE Nifty50 ended the year with positive returns. The Sensex rose over 9 % and the Nifty climbed about 10.5 % in local-currency terms, marking a tenth consecutive year of gains. However, this performance lagged far behind the sharp rallies seen across many global markets — including the Nasdaq, Dow Jones, major Asian indices and emerging markets — which posted double-digit or much higher returns over the same period.
A key factor in the underperformance was heavy selling by foreign institutional investors (FIIs), which pulled out a record amount of capital from Indian equities in 2025. India also faced currency weakness — with the rupee among the worst-performing Asian currencies — eroding gains for overseas investors. Other challenges included a lack of strong momentum in AI-linked sectors, trade policy uncertainties, and muted earnings growth that failed to keep pace with peers.
While domestic institutional investors (DIIs) stepped in with substantial inflows and helped support the market, the relative gains remained small when measured against global benchmarks such as South Korea’s Kospi, Japan’s Nikkei 225 and the MSCI Emerging Markets index, which all posted much higher returns. Experts note that valuation pressures, foreign outflows, and macroeconomic headwinds contributed to India’s subdued relative performance in 2025.
Looking ahead to 2026, analysts are cautiously optimistic that easing geopolitical and tariff tensions, potential corporate earnings improvement and renewed foreign investor interest could help India narrow the gap with global peers, although risks such as currency volatility and external trade uncertainties remain.