Indian stock market: Nifty 50 posts a modest gain of 5% in FY25; will FY26 be a year of healthy gains? Experts weigh in

Indian stock market investors will likely remember the financial year 2024-2025 as a tale of two halves. Why? Because of the stark contrast in market performance between April-September and October-March.

In the first half of the year (H1FY25), the Nifty 50 index surged 16 per cent, reaching a fresh peak of 26,277.35. However, the second half told a different story—the index plunged 9 per cent.

Despite the downturn in the latter half, the strong gains earlier in the year helped the Nifty 50 end FY25 with a modest gain of 5.34 per cent. Meanwhile, the index is still 10.5 per cent down from its peak level.

How did Nifty 50 perform in FY25?

After a solid 25 per cent gain in FY24, hopes were high that the Indian stock market's bullish run would extend to FY25 also because of healthy economic growth, foreign capital inflows and the robust influx of domestic retail investors.

This hope was fuelled further by the market's strong performance in the first half of the year, which led many experts to believe that the index could end the year somewhere near 28,000.

This hope, clearly, was dashed.

The index ended with low single-digit gains, with 21 stocks in the red.

11 stocks falling more than 10 per cent. Shares of IndusInd Bank (down 58 per cent), Jio Financial (down 36 per cent), Tata Motors (down 32 per cent), Adani Enterprises (down 28 per cent) and Hero MotoCorp (down 21 per cent) ended as the top losers in the index.

On the other hand, 17 stocks exhibited remarkable resilience and rose more than 10 per cent, while 13 jumped more than 20 per cent in the index in FY25.

Six stocks - Bharat Electronics (up 50 per cent), Bharti Airtel (up 41 per cent), Shriram Finance (up 39 per cent), Mahindra and Mahindra (up 39 per cent), Trent (up 35 per cent) and Eicher Motors (up 33 per cent) - surged over 30 per cent in the index.

While the first half of the year was driven by economic growth momentum and retail money, the second half saw sharp corrections due to weak earnings, a slowdown in economic growth, stretched valuations, and massive foreign capital outflow.

In the later part of the year, heightened global uncertainty due to US President Donald Trump's tariff policies also weighed on the domestic market sentiment.

The Nifty 50 remained in the red for five consecutive months- from October 2024 to February 2025- marking its longest monthly losing streak since its inception in 1996.

Will FY26 be better than FY25 for the Indian stock market?

While the index rose in March amid signs of economic growth picking pace and the resumption of buying by foreign institutional investors, sentiment is still cautious because there is no certainty about how Trump's tariffs will hit the global economy.

Experts say the global tariff war and uncertainty related to it could also be a key trigger for global and Indian markets next year.

There is also caution about earnings revival in India when valuations of several pockets in the mid and small-cap segments remain stretched.

"Indian equities remain volatile amid global uncertainties and slowing corporate earnings. While valuations have cooled off from recent highs, mid and small-cap stocks still appear expensive," Mittul Kalawadia, Senior Fund Manager at ICICI Prudential Mutual Fund, observed.

Kalawadia underscored that structural tailwinds like strong balance sheets and policy reforms support long-term growth. However, near-term risks such as trade tensions, liquidity concerns, and moderating capex could weigh on sentiment.

As volatility may continue in the short term, experts advise investors should diversify their portfolios.

"Volatility may continue. Such a phase can be optimally navigated through hybrid funds or dynamic asset allocation strategies," Kalawadia said.

Devarsh Vakil, the head of Prime Research at HDFC Securities, suggests investors focus on India's long-term growth story, which remains solid. He said investors should see the recent correction as an opportunity to accumulate quality stocks at the current juncture.

"India’s long-term structural growth narrative remains compelling, and the recent sharp market correction gave an excellent opportunity to long-term investors to add quality stocks at an attractive price to their portfolio," said Vakil.

Vakil believes the Indian stock market may consolidate in early FY26 before targeting higher levels.

He said the market's recovery hinges on two critical factors- uncertainty from the geopolitical environment and the trajectory of earnings recovery in upcoming quarters.

Vakil said the pace of monetary easing, stabilisation in commodity prices, and revival in urban consumption patterns are the three key factors influencing earnings performance.

"The street expects Nifty earnings to grow between 12-15 per cent each in FY26 and FY27. On that basis, Indices as well as mid- and small-cap stocks post recent sharp corrections have become extremely attractive," said Vakil.

Vakil pointed out that while midcap indices have declined 20-22 per cent from their highs, individual stocks have weathered much deeper corrections of 25-40 per cent, creating genuinely attractive valuation opportunities across the market landscape.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.