Even with a roller‑coaster of news this year, India’s Nifty 50 index closed 2025 close to the psychologically important 26,000 mark, up almost 10% from the start of the year.
Equity Market Performance
The index hit a fresh all‑time high a few weeks ago, but the rally didn’t last long. Still, it stayed near that peak, giving investors a solid gain for the year.
Fixed‑Income Snapshot
Ten‑year government bond yields fell to about 6.58%, down from 6.80% at the beginning of 2025. Lower yields mean cheaper borrowing costs for the government and, eventually, for businesses.
Key Economic Drivers
- Tax and GST cuts: The 2025 budget introduced tax relief and a September GST reduction, boosting consumer spending.
- RBI rate cuts: The central bank lowered policy rates and reduced banks’ cash reserve requirement, encouraging loans.
- Currency pressure: The rupee slipped from Rs 85/USD to about Rs 90/USD, keeping investors cautious.
Business Cycle – Rising Profits
Strong domestic demand helped corporate earnings estimates improve for FY26 and FY27, especially among Nifty‑50 constituents.
Credit Cycle – Easier Money
Besides rate cuts, the RBI used open‑market operations to keep liquidity flowing, supporting a smoother transmission of lower rates to borrowers.
Sentiment Cycle – Still Wary
Even with better fundamentals, investors remain nervous about the rupee’s weakness and the balance‑of‑payments picture. A potential trade deal with the EU and the US could ease these concerns.
Outlook for 2026
Inflation, especially core inflation, is expected to dip below 4%. This opens the door for further rate easing, which should keep both equity and bond markets supportive. History shows that periods when markets are undervalued often lead to strong future gains.
Bottom Line
India’s economy and markets have shown resilience despite global uncertainty. With fundamentals improving and policy still supportive, retail investors have good reasons to stay optimistic for 2026.
Disclaimer
Remember, this is my view, not a prediction. Always do your own research and consider your risk tolerance before making any investment decisions.