Though the Indian stock market posted double-digit gains in 2025, extending its bull run to a tenth straight year, returns were far lower compared with other global and Asian peers. The market was weighed down by foreign outflows, a weakening rupee, and concerns over a potential trade deal with the US, making Indian stocks among the most vulnerable to global shocks.
The underperformance also led to a decline in India’s share of global market capitalization, as Asian peers occupied a larger portion of the pie, outperforming their Western counterparts amid a rapid rise in demand for AI- and chip-related stocks.
India’s share of global market capitalization improved in September and November but eased in December, as foreign portfolio investors (FPIs) further trimmed their exposure to Asia’s third-largest economy. The selling pressure was compounded by a slide in the rupee, which eroded returns for overseas investors.
According to domestic brokerage firm Motilal Oswal, India’s share of the global market cap stood at 3.5% in December 2025. India remains among the top 10 contributors to global market capitalisation, and at its peak in September 2024, its share had reached 4.6%.
In 2025, global market capitalization rose 22.1% ($27.4 trillion), whereas India’s market cap increased marginally by 2.8% year-on-year.
The report shows that South Korea recorded the highest increase in market capitalization at 77%, reaching $2.7 trillion, followed by China (34%), Taiwan (31%), Germany (29%), Brazil (27%), the UK (27%), Indonesia (25%), Japan (20%), and the US (16%).
The report also highlighted that India’s market cap-to-GDP ratio has been volatile, plunging to 57% of FY20 GDP in March 2020 from 80% in FY19 before rebounding sharply to 132% in FY24 and 126% in FY25. It now stands at 133% of FY26E GDP, up 9% year-on-year, well above its long-term average of 87%.
From US to Korea: Global markets beat India in 2025
The Indian stock market sharply underperformed its key Asian peers, many of which surged between 16% and 70%. The underperformance was so pronounced that Indian equities also lagged Pakistan, which rallied over 50%.
Pakistan’s KSE 100 index surged 51.20% in 2025, not only outperforming Indian markets but also emerging as one of the best-performing equity markets globally. The rally was driven by the country’s smaller market size, IMF support, and domestic rate cuts that boosted liquidity.
Among other global markets, South Korea’s KOSPI topped the charts with a strong 75.63% surge. Other Asian peers, including China, Hong Kong, and Japan, also delivered returns two to three times higher than the Sensex, rising 21%, 28%, and 28%, respectively, over the year.
The US market also posted solid gains, with the broader S&P 500 index advancing 17.25%, while the UK’s FTSE 100 rose 22%.
Brokerages see Indian markets recovering on earnings revival
Motilal Oswal said it believes Indian markets are well poised to retrace the underperformance seen in CY25, supported by improved earnings prospects, supportive domestic macroeconomic conditions, and a better geopolitical environment. Valuations are reasonable, with the Nifty trading at 21.2x, close to its long-period average (LPA) of 20.8x, and any evidence of a pickup in earnings growth could help valuations expand.
Axis Securities echoed a similar view, saying that key headwinds—such as weak corporate earnings, stretched valuations, and tariff-related concerns—that weighed on market sentiment are likely to ease next year.
The brokerage expects 2026 to be more constructive for the Indian stock market, with the market transitioning from a phase of valuation-led consolidation to an earnings-driven cycle.
Disclaimer, This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
