2025 was a mixed year for Indian stocks: big companies grew, while many smaller firms fell.
2025 Performance by Market Size
- Large‑cap stocks: up about 9%
- Mid‑cap stocks: up roughly 4%
- Small‑cap stocks: down around 9%
What Helped the Market
Three groups performed better than others:
- Auto sector: A surprise cut in GST boosted earnings and share prices.
- Banking and finance: Good balance sheets and cheap valuations attracted buyers.
- Metals: Strong global demand kept prices up.
What Held the Market Back
- Earnings growth stayed low at 6‑8% for FY2025‑26.
- The rupee fell about 6% after the U.S. raised tariffs, hurting the trade balance.
- Foreign portfolio investors pulled out $17.7 billion, the biggest outflow since the 2008 crisis.
- Corporate profits weakened and the current‑account gap widened toward 1.5% of GDP.
Why a US‑India Tariff Deal Matters
If the two countries reach a tariff agreement, it could reverse the outflow of foreign money, lift the rupee and give Indian stocks a fresh boost.
- History shows that sentiment can swing quickly after a trade win.
- More foreign money would likely raise valuations across the board.
Oil Prices Won’t Hit India Hard
Global oil demand stays weak and prices are under $60 a barrel. Even if Venezuela’s output changes, oil costs for India are expected to stay roughly the same, keeping the import bill stable.
Looking Ahead to 2026
Assuming a positive tariff outcome, analysts expect:
- Earnings growth of 15‑17% in FY2027.
- Financials to contribute 45‑50% of total earnings growth through FY2028.
- Valuations to stay reasonable at about 20 times earnings.
If the tariff talks stall, the market could still feel pressure.
Bottom Line
2025 showed both strengths and weaknesses in Indian equities. A US‑India tariff agreement could be the catalyst that turns the mixed picture into a stronger rally in 2026, especially for retail investors looking for growth opportunities.
Remember, this is perspective, not prediction. Do your own research or consult a certified expert before making any investment decisions.