The Sensex is likely to close December a little lower, ending the year without the traditional Santa rally that many investors expect.
Why December Was Weak This Year
Historically, December has been a strong month for Indian stocks. In the last 46 years, the market posted gains in about three‑quarters of Decembers. This year, however, the index is set to fall around 0.2%, making it one of the worst Decembers since 2022.
Domestic Investors Held the Line
Local institutional investors (DIIs) stepped in with heavy buying. They pumped about ₹59,903 crore into the market in December, which helped stop a steeper decline.
- Domestic investors put in roughly ₹7.55 trillion during 2025.
- Without their support, the market could have dropped at least 10% lower.
These investors were motivated by weak returns in other assets like debt and real‑estate, pushing more money into stocks.
Foreign Investors Pulled Back
Foreign portfolio investors (FPIs) sold about ₹11,830 crore in December, reversing a previous pattern of net buying. Their caution stems from:
- Sticky global inflation and delayed rate‑cut expectations.
- Geopolitical risks and volatile currency moves.
- Higher valuations that make Indian equities look expensive compared to other markets.
What This Means for Retail Traders
For everyday investors, the key takeaway is that the market is now more dependent on domestic money than on foreign flows. Short‑term dips should be seen as buying opportunities rather than warning signs.
- Seasonal patterns like the “Santa rally” still exist, but they can be outweighed by global risk factors.
- Keep an eye on macro‑economic news—interest rates, inflation, and geopolitical events—rather than relying solely on calendar trends.
- Consider a diversified approach that balances equities with other asset classes to manage risk.
Disclaimer
Remember, this is my perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.