Last Updated: 2nd Dec, 2025
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📌 2025 has been unusual on many counts:
▪️ US equities have seen their steepest underperformance in 16 years.
▪️ Capital flows into emerging markets are well above the historical average.
▪️ Yet Indian equities have trailed EM peers the most in 25 years.
▪️ Global investors have crowded into the AI trade; India is seen as an anti-AI market that was already trading at high valuations.
▪️ India has been among the worst hit by Trump tariffs, and a depreciating rupee has added to the pressure.
▪️ Domestic money has held up index levels, but big part of that has gone into primary issuances rather than the secondary market.
That is the backdrop.
Now the other side of the picture.
What Is Turning in Favour of India?
For India, a few things are turning in our favour:
▪️ Earnings have surprised on the upside. Downgrades have reduced, and upgrades have gone up.
▪️ Consumption is getting support from tax cuts, GST cuts and better liquidity in the system.
▪️ Inflation is at the lowest levels in years, which should allow the RBI to cut rates (with the Fed expected to move in the same direction).
▪️ Private capex will pick up (but gradually), helped by roughly ₹1.5 lakh crore of fresh primary market proceeds over the last two years.
▪️ After a long phase of price and time correction, sentiment can turn faster than most people expect.
▪️ A trade agreement is still a possibility, and several FTAs are in the pipeline.
In short, the near term has been tough, but the medium term is not broken.
What Should Investors Do Now?
What should investors do with this?
▪️ Do not write off India because of one difficult phase.
▪️ Do not expect a repeat of 20%+ annual returns that you saw for 3 years in a row.
▪️ Reset expectations to around 12–14% for next 12 months, which is still healthy.
▪️ Stay focused on earnings, balance sheets and asset allocation, not just headlines.
A Year That Tests Patience
This is a year that tests patience more than intelligence.
If you can stay realistic on returns, and disciplined in your approach, this phase will feel like a pause, not an end.
