Even as the Indian stock market delivered double-digit gains in 2025 and extended its bull run to a tenth consecutive year, it significantly underperformed global and Asian peers, weighed down by persistent foreign outflows, a weakening rupee and concerns over a potential trade agreement with the United States.
The underperformance also resulted in a shrinking share of India in global market capitalisation, as several Asian markets surged on the back of strong rallies in artificial intelligence and semiconductor-linked stocks.
India’s Global Market Share Slips
According to a report by domestic brokerage Motilal Oswal, India’s share of global market capitalisation stood at 3.5% in December 2025, down from a peak of 4.6% in September 2024. While India remained among the top 10 contributors to global market capitalisation, sustained selling by foreign portfolio investors (FPIs) and currency depreciation dented returns for overseas investors.
In 2025, global market capitalisation jumped 22.1%, adding about $27.4 trillion, while India’s market cap rose a modest 2.8% year-on-year, highlighting the gap in performance.
Asia and Global Markets Outshine India
Several global and Asian markets delivered far superior returns. South Korea led the pack, with market capitalisation surging 77% to $2.7 trillion. Other strong performers included China (34%), Taiwan (31%), Germany (29%), Brazil (27%), the UK (27%), Indonesia (25%), Japan (20%), and the United States (16%).
India also lagged regional peers in index performance. While the Sensex posted moderate gains, markets such as China, Hong Kong and Japan rose between 21% and 28%, and Pakistan’s KSE-100 index surged over 51%, making it one of the world’s best-performing equity markets in 2025.
South Korea’s KOSPI index topped global charts, rallying over 75%, driven by heavy investor interest in technology and chip stocks.
Market Cap-to-GDP Ratio Remains Elevated
Despite the underperformance, India’s market capitalisation-to-GDP ratio remains well above historical averages. After plunging to 57% in FY20 during the pandemic, the ratio rebounded sharply to 132% in FY24 and 126% in FY25. It currently stands at 133% of FY26E GDP, nearly 9% higher year-on-year and significantly above the long-term average of 87%.
Outlook for 2026 Turns Constructive
Brokerages remain optimistic about a turnaround in 2026. Motilal Oswal believes Indian equities are well placed to recover lost ground, supported by improving earnings visibility, stable domestic macroeconomic conditions and easing geopolitical risks. The brokerage noted that Nifty valuations at 21.2x are close to the long-period average of 20.8x, leaving room for expansion if earnings growth accelerates.
Axis Securities echoed the view, stating that key headwinds such as weak earnings, stretched valuations and tariff-related uncertainties are expected to ease. The brokerage expects Indian markets to transition from valuation-led consolidation to an earnings-driven cycle in 2026.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Market data and views are based on publicly available information and are subject to change.
