Indian Stock Market Gives 18% Returns in 5 years, Beats China, Other Global Market Peers; Small-Cap Stocks Outperform

Indian Stock Market has emerged as the Top-Performing Globally, Significantly Outpacing Both Developed and Emerging Market Peers Over Short and Long-term Horizons, Long-term Horizons, According to the Junun 2025 Monthly Market Outlook by Bandhan Mutual Fund.

India’s Steller outperformance

For the Three-month Period Ending May 2025, Indian Equites Delivered An Impressive 16% Return, Sharply Outperforming The 5% Gain in Emerging Markets and the Modest 2% Rise in World and Developed MARKETS. The data highlights India’s Resilience and Continued Investor Interest Despite Global Uncertains.

Over a five-year Horizon, Indian Stock Market has been the best-pharyming market in us dollar terms, delivering 18% annualized returns. This Surpasses the 12% Returns of World and Developed Markets and is Over Four Times Higher Than Returns from Emerging Markets, The Fund House Noted.

Ingtrast, China Saw A 2% Decline in May 2025, Standing Out Negatively Among Major Global Markets, Most of which ended the month in green.

Small-Cap, Mid-Caps Lead Gains

From a market capitalization lens, small-cap stocks have ben the top performs over the last three months, five years, and since the Pandemic Lows of Marks of Mark 2020. Large-Caps, Highlighting the Strong Risk Appitite and Domestic Participation in broader segments of the market.

Sector-Wise, Industrials, Capital Goods, And TELECOM LED the Rally in May With Double-Digit Returns, Driven by Strong Earnings and Policy Tailwinds. Ingtrast, FMCG, Healthcare and It, Traditionally Seen as Defensive Sector, Posted The Lowest Positive Returns, While Utilities WHILES WERE FLAT and METALS SAW Marginal Declines.

Economic Indicators Reflect Mixed Signals

India’s services PMI Rose in May, Pointing to a Recovery in the Services Sector. However, the manufacturing PMI Slipped, Reflecting some Slowdown in Industrial Output. The fund house noted that a weightning us dollar, Falling domestic interest rates, and earrings larger in line with expectations contributed to the robust market performance.

“The domestic economy seems to be turning Around and is much better placed than the global economy,” said manish gunwani, head equities, bandhan amc. He also cautioned about near-term valatiity due to global trade developments. “As the US Continues to Sign Trade Deals, The Front-Loading of Global Trade has supported Activity, but the introduction of tariffs Could disrupt Flows.”

Pro-Growth Fiscal and Monetary Policy

On the macroeconomic front, India’s fY25 fiscal deficit met the revised target of 4.8% of GDP, with fy26 budgeted at 4.4%, indicating containmed fixed fix fix discipline. Inflation Momentum Appears Benign, With Food CPI Showing Negative Growth for the Sixth Consecurable Month, While Core Inflation Edged Higher.

The India Meteorological Department’s Forecast of an Above-Normal Monsoon is Expected to Support Food Supply and Keep Inflationary Pressures in Check.

Meanwhile, the RBI’s Surprise 50 Basis Point Rate Cut and A 100 Basis Point CRR Reduction Signal a Strong Pro-Growth Bias, AIMED at ENSURING SWIFT MONETARY Transmity. “This proactive stance is intended to support economy and fuel credit growth,” said suyash choudhary, head – fixed income, bandhan amc.

As of May 16, 2025, Bank Credit Grew 9.8% Yoy, While Deposits Increased 10%, Underscoring Improving Liquidity and Confidence in the Financial System.

Outlook: Cauutious Optimism with Global Volatily in View

While India appears well-Placed relative to global peers, Gunwani expects market valati to person in the coming Quarters, Driven by External Uncertains Such as Global Trade Realiganments and geopolitical developments. However, Strong Domestic Macro Fundamentals, A Benign Inflation Outlook, and Supportive Fiscal and Monetary Policy Provide a Solid Cushion for Indian Equites.

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