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Indian stock market gives 18% returns in 5 years, beats China, other global market peers; small-cap stocks outperform

Submitted by admin on June 16th, 2025

The Indian stock market has had the highest performance of all the markets in the US dollar over a 5 year horizon with 18 % annualised returns. This is higher than the 12 percent returns of world and developed markets and more than 4 times returns in emerging market, the fund house said.

Indian stock market has become the best performing market in the world and has far outshone its peers in the developed and emerging markets both in the long and the short term as per the June 2025 Monthly Market Outlook by Bandhan Mutual Fund.

Stellar Stellar Indian Outperformance

Indian stocks gave a sterling 16 percent showing through a duration of three months through May 2025 leaving the rising of 5 percent in emerging market equities and the relative 2 percent increase in world and developed markets far behind. The figures show the strength of India and the interest being shown by the investors irrespective of the uncertainties that confronted the rest of the world.

In US dollar terms, Indian stock market has emerged as the best in five-year lead with 18 per cent annualised overall returns. This is higher than the 12 percent returns of world and developed markets and more than 4 times returns in emerging market, the fund house said.

Conversely, China experienced a 2 percent fall in May 2025 which is unique among top markets in the world of which most of them closed the month in green.

Small-Cap, Mid-Caps gain Leadership

In the market capitalisation perspective, the best performing segments within the past three months, five years and since the pandemic lows of March 2020, are the small-cap stocks. Second place was held by mid-caps, then large-caps which emphasize on fast pace of risk taking and the level of domestic activity in the wider market segments.

Industrially, industrials, capital goods and telecom took the 20th lead in May, surging by over 10 per cent on good volumes and policy tail winds. On the contrary, less capital-intensive sectors such as FMCG, healthcare, and IT were the worst performers, with positive returns being the lowest, utilities were up flat, and metals returned a slight drop.

Mixed Signals in Economic Indicators

The Services PMI in India increased in the month of May, and this was a sign showing that the service sector was on the road to recovery. Nonetheless, Manufacturing PMI declined as a sign of some moderation in industrial performance. The fund house said that the strong performance on the market was helped by a weak US dollar, a decline in domestic interest rates, and earnings largely within expectations.

Manish Gunwani, Head Equities, Bandhan AMC said that the domestic economy is emerging to be upbeat and much stronger compared to the world economy. He was also cautious against short term fluctuations in the wake of world trade. The appearance and spillover of global trade has so far cushioned the US, but with the arrival of new tariffs, it may disrupt the flows since they have been front-loaded because the US has been signing trade deals.

Policy on Fiscal and Monetary Policy Pro-Growth Fiscal Policy

At the macroeconomic level, fiscal discipline in India continued as FY25 fiscal deficit was achieved at corrected level of 4.8 percent of GDP, although this was budgeted to reduce to 4.4 percent in FY26. Inflation is trending in a benign manner, with food CPI registering negative growth on sixth consecutive month and a tepid growth in core inflation.

The above-normal prediction by India Meteorological Department of the monsoons will smooth supply of food and stabilize inflationary pressure.

In the meantime, surprise 50 basis point cut by RBI and the 100 basis point reduction in CRR shows pro-growth bias and is a move towards speedy monetary transmission. The sui generis measure is aimed towards economic recovery and credit growth, said Suyash Choudhary, Head Fixed Income, Bandhan AMC.

Quickly, the improvement in liquidity and confidence towards the banking system was reflected by the 9.8 percent YoY increased bank credit and 10 percent increased deposits, as of May 16, 2025.

Outlook: Cautious Optimism in the minds of International Uncertainties

Compared to the rest of the world, the position of India seems to be quite promising, but according to Gunwani, the volatility of the market is likely to be preserved in the next few quarters due to the external instabilities, as global trade reorganizations and geopolitical trends. Nevertheless, good macro fundamentals in the country and favorable inflation prospects along with favorable fiscal and monetary policies lend good cushion to Indian equities.

• The benchmarks only slightly shifted as the day went by and closed with improved movements.
• Indian stock markets on Wednesday, were lacklustre in trend as major indexes came with slim trading range.
• BSE sensex closed down by 823 points (0.7 pct) at the closing bell on Friday.
• In the meantime, NSE Nifty ended 169 points down (0.7 per cent).
• The best gainers were TCS, Tech Mahindra and Maruti Suzuki.
• Adani Port, ITC, IndusInd Bank, on the other hand were the top losers.
• BSE MidCap dropped 0.2 percent and BSE SmallCap index dropped 0.2 percent.
• Sectoral indicators were moving at a negative level today with stocks in power sector and realty sector being sold.

These are Stocks That Are Able to Withstand The Volatility in the market

In case you desire to invest in companies that:

• Safe business models
• Quality-managerial behavior/under control
• Established track records of good execution
• Characteristics enabling them to get away with making it (and even flourishing) despite a declining market

Talking of Stock market, Rahul Shah, Co-Head of Research at Equitymaster, explores the very popular framework of Joel Tillinghast to outline how a person can differ the difference between investing, speculating and gambling.

He also opposes the common idea that to be always on the way to succeed is to do a deep research.

Short Term Stocks to Buy or Sell June Recommendations: Call +91 7980522404 to Invest

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