Indian Stock Market Lags Behind Its Global Peers in 2025. Is the Worst Yet to Come?
The Indian Conundrum:
The Indian stock market is currently experiencing a sharp reversal, with a wave of selling pressure rattling investor confidence, sending stocks to trade at multi-month lows. The once- soaring market, which was once expected to reach new heights, is now struggling to find a floor to halt the sell-off. As a result, the market capitalization of India has fallen below the $4 trillion mark for the first time in over 14 months, with offshore investors pulling out over ₹1 lakh crore from equities.
Heading South:
The decline in the Indian stock market is not an isolated issue. The markets have been reacting to every small development, with heightened volatility amplifying price swings and exerting significant pressure on indices. Stocks across the board are witnessing a severe beating in a sustained sharp sell-off, with mid and small-cap segments leading the decline.
Comparing Global Peers:
While the Indian market struggles, its global peers are faring well, despite global economic uncertainty. China’s Shanghai Composite Index is up 0.23% in 2025 so far, and other major Asian exchanges, such as Hong Kong’s Hang Seng and South Korea’s Kospi, have gained 17% and 10%, respectively. Major European indices, such as the DAX, CAC 40, and FTSE 100, have surged by up to 13%. Meanwhile, the two major U.S. indices, the Dow Jones Industrial Average and the S&P 500, have risen by 2.44% and 2.46%, respectively, during the same period.
Rush to Safety:
As the Indian market lags behind its global peers, investors are seeking refuge in safe-haven assets, particularly gold. The yellow metal has maintained a winning streak over the past eight weeks, marking its best weekly performance since the COVID-19 pandemic. Gold prices have risen from $2,039 per troy ounce to the current trading price of $2,931, delivering a stellar gain of 44%. In the domestic market, gold prices have surged from ₹62,735 per 10 grams to ₹86,560, translating into a 38% gain. Analysts have revised their target prices for the metal, as previous projections have been surpassed earlier than expected.
Bracing for More Volatility:
Despite the sharp decline in Indian markets, many analysts expect continued pressure on equities. They believe valuations across most parts of the market remain expensive, and the market will remain in a "corrective to consolidation" phase for the next 3-4 months. The rise in U.S. interest rates, driven by factors such as a widening fiscal deficit, persistent inflation, and uncertainty surrounding Trump’s policies, is also expected to persist, as indicated by Fed Futures probabilities.
The Verdict:
The Indian stock market is in a state of disarray, with no clear signs of a turnaround in sight. The market is expected to continue its downward trajectory, with valuations remaining high and offshore investors continuing to pull out. The best course of action for investors is to adopt a cautious approach, diversifying their portfolios and seeking refuge in safe-haven assets, such as gold. As one expert noted, "The worst is yet to come, and it’s essential for investors to prepare for the next phase of the market correction."
Live News Daily is a trusted name in the digital news space, delivering accurate, timely, and in-depth reporting on a wide range of topics.