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India Markets: 7 Events That Defined 2025
23 Dec
Summary
- Indian equity markets are at an inflection point, shifting from liquidity to earnings, policy, and stability.
- Despite Nifty/Sensex gains, broader markets lagged; IPOs thrived amidst continued FII selling.
- GDP exceeded 8% with falling inflation, prompting the RBI to cut rates by 125 bps in 2025.
India's equity markets navigated a critical juncture in 2025, with the focus shifting from liquidity to a combination of earnings growth, policy support, and macro stability for future returns. While headline indices like the Nifty and BSE Sensex achieved significant gains, the broader market segments, including mid and small-cap indices, underperformed. This period saw a continued surge in Initial Public Offerings (IPOs), attracting substantial capital despite ongoing foreign institutional investor (FII) selling.
Several key factors shaped the year, including slowing but recovering earnings growth, particularly in industrial sectors. However, trade tensions with the US, marked by higher tariffs, posed a significant headwind. FIIs divested equities worth over Rs 3 lakh crore, influenced by global dollar strength and relative valuations. Conversely, the primary market thrived, with over 110 IPOs launching, marking a record.
On the macroeconomic front, 2025 presented a more robust picture. The Indian Rupee tested historic lows against the dollar, influenced by trade uncertainties and limited central bank intervention. However, GDP growth accelerated past 8% in the second quarter, while inflation dropped significantly, prompting the Reserve Bank of India to cut benchmark rates by 125 basis points.
