As 2025 draws to a close, global equity markets have delivered a year marked by sharp regional divergence, selective leadership, and restrained breadth. While several international indices posted strong relative gains, Indian equities navigated a more volatile and internally fragmented path—highlighting the importance of relative strength, sector rotation, and market structure in portfolio decision-making.
Global Markets: Clear Leaders Emerge
A relative performance comparison of major global indices continues to highlight Asia as the clear leader in 2025, albeit with evolving momentum dynamics. The Korea Stock Exchange KOSPI Index remains the standout outperformer on a year-to-date basis, delivering returns close to ~69%, underpinned by sustained strength in semiconductors, export-oriented manufacturing, and improving earnings visibility. HangSeng and Nikkei 225 also remains in a leadership position, supported by structural reforms, improved corporate governance, and steady foreign participation.
However, Relative Rotation Graph (RRG) analysis indicates a moderation in relative momentum for both KOSPI and Nikkei. While these indices continue to reside firmly within the Leading Quadrant, the recent trajectory suggests a cooling of momentum after an extended phase of outperformance — a typical characteristic of mature leadership rather than an outright trend reversal.
In contrast, developed market indices in Europe and the U.S. are exhibiting improving relative characteristics. The FTSE 100 is gradually rotating toward the Leading Quadrant, signaling an early pickup in relative strength after a prolonged period of underperformance. Meanwhile, the DAX Index, positioned deeper within the Improving quadrant and farther from the center point, reflects strengthening relative momentum alongside improving relative strength, increasing the probability of relative outperformance going forward.
U.S. benchmarks such as the Dow Jones Industrial Average, S&P 500, and NASDAQ remain relatively stable, with rotations suggesting consolidation rather than decisive leadership shifts at this stage. Overall, the RRG setup points toward a potential broadening of global leadership, moving away from concentrated Asian dominance toward a more balanced participation across Europe and select U.S. indices.
Meanwhile, India’s Nifty 50 continues to reside in the Improving quadrant, indicating stabilizing momentum but lagging relative performance versus global peers.
Indian Markets in 2025: Volatility with Progress
The Nifty 50 began 2025 near the 24,000 mark, entering the year amid a corrective phase influenced by global trade tensions and macro uncertainty. This volatility intensified during the early months, culminating in a decisive bottom near 21,743.65. From this level, the index staged a structurally healthy recovery, forming higher tops and higher bottoms, and eventually recording a marginal new lifetime high around 26,325.80.
Despite achieving record levels, the YTD return of approximately 9.60% underscores a year of consolidation rather than broad-based expansion. Technically, Nifty remains well-supported by its rising trendline structure, though it continues to face resistance near upper supply zones.
Bank Nifty: The Domestic Outperformer
In contrast, Bank Nifty outperformed the broader market decisively. Opening the year near 50,841, the index surged to a record high of 60,014.30, delivering returns of nearly 15.50% YTD. This strength was primarily driven by PSU banks, which benefited from improved asset quality, earnings visibility, and favorable credit growth conditions.
However, recent price action suggests consolidation near support levels—an expected pause following a strong directional move.
Sectoral & Broader Market Divergence
Sectoral performance in 2025 highlights selective leadership. Nifty Auto (+20%) and Nifty Metal (+25%) joined financials and PSUs as relative outperformers. On the other hand, Nifty Media (-23%), Nifty IT (-11%), and Nifty Realty (-15%) remained under pressure, while Pharma and Energy ended the year marginally lower.
Perhaps the most notable feature of 2025 was the lack of broader market participation. While the Nifty500 index gained (~+5.5%), Nifty Midcap index (+14%), the Smallcap 100 (-5.70%) and Microcap indices (-11.50%) significantly underperformed—signaling internal divergence and restrained risk appetite.
Outlook for 2026: What to Watch
Heading into 2026, From a technical standpoint:
- Nifty500 must surpass 24,035
- Nifty Smallcap must decisively cross 19,716
- Nifty Microcap must reclaim 26,476
Such breakouts would signal renewed risk-on sentiment and healthier market breadth.
On the macro front, a favorable US–India trade agreement, combined with ongoing GST reforms and policy stability, could provide incremental support to sentiment.
In summary, 2026 is likely to be defined not by headline index levels alone, but by the depth of participation beneath the surface. the primary trend of India’s frontline indices remains constructive. Sustained higher-top–higher-bottom structures on Nifty and Bank Nifty suggest the broader uptrend is intact. However, for the next leg of the bull market to gain durability, broader participation will be critical.
Foram Chheda, CMT,
Technical Research Analyst