The Month That was : December 2025

Indian equity markets ended the month with modest losses, underperforming global peers. The Nifty Index declined by 0.3%, while broader markets were weak, with mid-cap and small-cap indices falling 0.9% and 0.6%, respectively. Sectoral performance was mixed, with metals, oil & gas, and auto stocks outperforming, whereas capital goods, consumer durables, and realty stocks were the key laggards. Globally, markets ended largely positive, led by strong gains in South Korea, Taiwan, and Malaysia, highlighting India’s relative underperformance during the month.

Investor sentiment was shaped by a series of global and domestic policy actions. The RBI cut the policy repo rate by 25 bps to 5.25% while maintaining a neutral stance, while the US Federal Reserve delivered its third 25 bps cut of the year. In contrast, the Bank of Japan raised rates by 25 bps to 0.75%, the highest level since 1995. On the flows front, FIIs sold USD 2.6 billion, while DIIs bought USD 8.1 billion during the month.

On the macroeconomic front, inflation remained benign but edged up marginally, with CPI inflation rising to 0.71% in November from 0.25% in October, while WPI inflation stayed in deflation at (-)0.3% yoy. Industrial activity was robust, with IIP growth accelerating to 6.7% in November 2025, marking a 25-month high.

Market Outlook:

Looking ahead, Indian equity markets may continue to experience selective volatility amid mixed global cues and uncertainty around signing of trade deal with USA. However, supportive domestic fundamentals, lower policy rates, strong industrial growth, benign inflation, and sustained domestic institutional flows should help limit downside risks in the markets. Also, policy reforms such as GST rationalization, improving growth visibility on GDP and earnings remain key tailwinds, positioning the market well for a gradual improvement in sentiment over the medium term.

Happy Investing!