India posts slowest market-cap rise in years despite global surge
What's the story
India's total stock market capitalization grew by a mere 2.3% in 2025, the slowest rate in three years. The growth was from $5.17 trillion at the end of 2024 to $5.27 trillion this year. This sluggish performance comes despite a global surge that saw most major markets post significant gains during the same period.
Market comparison
Global markets outperform India in 2025
While India's market cap growth was sluggish, other global markets performed exceptionally well. Canada led the pack with a whopping 36% increase in its market cap to $4.2 trillion. China and Taiwan followed closely behind with nearly 34% and 31% gains, respectively. Hong Kong and Germany also saw their market caps rise by around 30%.
Global performance
UK, France, Japan, US also post significant market cap gains
The United Kingdom and France also saw their market caps rise by 27% and 23%, respectively. Japan and the United States added about 20% and 17% to their market caps. Overall, the global market cap witnessed a massive surge of 22%, rising from $124 trillion in 2024 to $151 trillion this year.
Market challenges
India's market performance hindered by multiple factors
India's market performance was hampered by high valuations, earnings downgrades, and muted growth expectations for FY26. The foreign portfolio flows were also weak as global investors moved to markets with better perceived value and earnings momentum. Further, the domestic market's limited exposure to the artificial-intelligence theme—an important driver for many global indices in H2 2025—restricted gains.
Market resilience
Sensex and Nifty maintain record highs despite challenges
Despite the challenges, Sensex and Nifty continued to trade near record highs. This was mainly due to strong domestic inflows and resilient macro indicators. The Nifty's one-year forward price-earnings multiple is currently at 21.5 times, about 4% higher than its long-period average of 20.8 times. Broader markets are more expensive with the Nifty Midcap 100 and Smallcap 100 trading at premiums of 26% and 50%, respectively.
Future outlook
Market strategists predict cautious foreign flows
Market strategists expect foreign flows to remain cautious in the near term due to rupee weakness and tight domestic liquidity. These are a result of currency defense measures. However, brokerage commentary suggests that structural domestic inflows remain strong, backed by low nominal interest rates and reduced tax incentives for debt mutual funds. This has made fixed income less attractive for long-term savers.