AS WARREN BUFFETT famously advised, “Do not put all your eggs in one basket.” That lesson fits the market situation in 2025 perfectly, as sharply divergent moves across asset classes exposed the cost of concentrated bets and reinforced the importance of portfolio balance. The year served as a real-time reminder that markets rarely move in sync and often defy even seasoned expectations. While certain assets surged to historic highs, others stagnated or delivered returns that barely kept pace with inflation.

Gold leads, silver outperforms

If one asset truly captured investors’ imagination in 2025, it was gold. Marking its third consecutive year of record highs, the yellow metal surged over 60% year-to-date (as of December 17, 2025), scaling more than 50 all-time highs throughout the year, says the NSE Market Pulse report.

Globally, gold emerged as one of the strongest-performing assets, touching a record $4,381.58 per ounce in October, according to World Gold Council (WGC) data.

In a world unsettled by geopolitical tensions, trade disruptions, currency volatility, and shifting monetary regimes, the yellow metal once again reaffirmed its role as the ultimate hedge. In India, gold prices climbed to a record ₹1,32,000 per 10 grams, rising over 60% in 2025, with rupee depreciation amplifying gains compared with global markets.

In a similar trend, silver reached a new all-time high of $67.45 per ounce in December, while breaching the ₹2 lakh per kilogramme mark for the first time in India. Supported by record investment inflows, structural supply deficits, and tightening availability, silver emerged as the top-performing precious metal of 2025, delivering a YTD return of over 130% as of December 17, 2025 — significantly outperforming gold’s returns.

“The precious metals rally proved especially valuable for investors with diversified portfolios. Multi-asset portfolios benefited materially from the rally in gold and silver, which helped diversify returns and lift overall performance in a year when equity returns were largely sub-par,” says Prateek Nigudkar, senior fund manager, Shriram AMC.

Indian equities lag

In stark contrast to the stellar run in precious metals, Indian equities remained largely range-bound in CY25 YTD, lagging global peers. According to Jefferies, Indian equities recorded their “worst relative performance” in nearly three decades against both Asian and emerging market peers, weighed down by sustained foreign outflows, slowing earnings growth and persistent currency pressures.

The MSCI India index, that tracks large- and mid-cap stocks in India, rose just 2.2% in U.S. dollar terms on a total-return basis YTD as of December 17, 2025, according to Jefferies. In contrast, global peers delivered far stronger gains, with MSCI Asia Pacific ex-Japan up 25.9%, MSCI Emerging Markets rising 29.9%, and the MSCI World index gaining 21% over the same period.

Domestically, returns appeared more resilient in rupee terms but remained modest. According to the NSE Market Pulse report, the Nifty 50 gained 11.5%, while the broader Nifty 500 rose 7.1% (as of December 17, 2025), reflecting the lack of broad-based participation. Within the broader market, the Nifty Midcap 100 climbed 6.25%, while the Nifty Smallcap 100 slipped 6%, underscoring the uneven nature of the rally.

Even as benchmarks recovered from a nearly 17% correction from their September 2024 peaks to scale fresh all-time highs by December 1, the journey was marked by an unusually long 14-month consolidation. Stretched valuations, geopolitical and trade-related uncertainties, sustained foreign investor selling and intermittent weakness in corporate earnings repeatedly stalled momentum.

Motilal Oswal highlights a striking disconnect. While the Nifty hit record highs, India’s overall market capitalisation remained flat year-on-year at $5.3 trillion and below its September 2025 peak. India’s share of global market capitalisation fell sharply to 3.6% from 4.7% a year earlier.

“Despite benchmark indices flirting with lifetime highs, the broader market continues to trade on a weaker footing. This follows a deceleration in earnings growth momentum since the June 2024 quarter, after 18% earnings CAGR during FY20-FY25,” says Sunny Agrawal, head, fundamental research at SBI Securities.

InvITs and REITs shine

For investors willing to look beyond traditional equities, 2025 turned out to be a rewarding year for Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). While these instruments are still relatively new and not yet widely understood in India’s capital markets, they stood out for delivering steady, dependable returns at a time when equity performance was uneven.

The Nifty REITs & InvITs index rose 23.1% during the year, outperforming broader equity benchmarks. Backed by rent- and toll-generating assets, these trusts benefited from predictable cash flows, inflation-linked revenue structures, and a supportive regulatory environment.

The growth of India’s REIT ecosystem also tells a compelling story. What began with a single listed REIT managing about 33 million sq ft in 2019 has expanded into a platform of five listed REITs overseeing roughly 174 million sq ft of office and retail space. Market capitalisation has climbed sharply from ₹26,400 crore in FY20 to nearly ₹1.6 lakh crore by September 2025, while total assets under management stood at around ₹2.35 lakh crore as of Q2 FY26.

InvITs have followed a similar trajectory. Total AUM across listed, public and private InvITs has climbed to around ₹7 lakh crore — representing a growth of over 1,000% in the past five years — while market capitalisation reached ₹2.6 lakh crore by Q2 FY26. Since inception, InvITs have distributed more than ₹78,000 crore to investors, including ₹10,000 crore in H1FY26 alone. Rising participation from mutual funds has further deepened the market, with 25 fund houses collectively investing about ₹55,000 crore in REITs and InvITs so far.

“Amidst evolving market conditions, fixed-income instruments are positioned to assume a meaningful role in diversified investment portfolios by enhancing stability and mitigating risk,” says Amit Modani, senior fund manager, fixed income, Shriram AMC.

Cryptocurrencies on a wild ride

Cryptocurrencies, which experienced a rollercoaster ride in 2025, were the opposite end of the risk spectrum. Total crypto market capitalisation, at $3.37 trillion at the end of December 2024, surged to a record $4.20 trillion by October 2025, and then corrected sharply to around $3 trillion by December 20.

Bitcoin, the largest contributor to overall market value, corrected to around $86,500, from an all-time high of $126,000 in October.

Despite periodic rallies, caution dominated professional investor commentary. “It is very difficult to assess the fair value and long-term potential of cryptos,” says Agrawal.

Capital flows and policy shifts

One of the defining narratives of 2025 was renewed rupee weakness, driven not just by global dollar strength and trade uncertainty but also by a decisive shift in domestic monetary policy. Jefferies notes that RBI turned “unambiguously dovish” after Sanjay Malhotra took over as governor in December 2024.

In 2025, the central bank cut the repo rate by a cumulative 125 basis points, from 6.50% to 5.25%, against a backdrop of sharply moderating inflation. CPI inflation fell to a 26-year low of 0.25% in October, followed by 0.71% in November, pushing real rates to elevated levels.

Meanwhile, capital flows tell a mixed story. Gross foreign direct investment (FDI) remained healthy, rising 13% year-on-year to $81 billion in FY25 and 16% to $50 billion in H1FY26. But foreign institutional investors (FIIs) offloaded equities worth ₹1.44 lakh crore in the cash market in 2025 as global capital rotated towards markets perceived as beneficiaries of artificial intelligence (AI). According to Axis Capital, India was viewed as an “AI loser,” partly due to concerns that AI could disrupt Indian IT services, which account for 11% of the Nifty’s market capitalisation.

“Continued FII selling is being driven by a weaker earnings growth momentum, relatively expensive valuations compared with other emerging markets, and a global preference for developed markets. Strong domestic liquidity has also enabled smoother exits. In addition, the absence of a pure-play AI investment story in India and the increase in capital gains tax have weighed on foreign investor sentiment,” says Agrawal of SBI Securities.

Resilience amid global headwinds

While Indian equities lagged global peers, the structural strength of domestic markets continued to improve.

Domestic institutional investors (DIIs) infused over ₹7 lakh crore into equities this year, extending their buying streak to 28 consecutive months. This was reinforced by robust retail participation, with average monthly SIP inflows rising 24% YoY to ₹27,634 crore in 2025, helping valuations remain resilient despite sustained foreign selling. India’s investor base expanded from around 30 million in 2019 to over 120 million in 2025.

“Strong domestic liquidity is acting as a counterbalance to persistent FII selling and has protected large-cap stocks from deep corrections till now,” says Agrawal.

This divergence led to a decisive shift in ownership.

Foreign portfolio investors (FPIs) now own just 16.9% of NSE-listed companies, their lowest share in over 15 years, as of September 2025. The decline was broad-based, with FPI share in the Nifty 50 down 43 bps to 24.1% and in the Nifty 500 down 46 bps to 18%, both at multi-year lows. On the other hand, MFs now hold a record 10.9% stake in NSE-listed companies, 11.4% in the Nifty 500, and 13.5% in the Nifty 50. Their steady rise helped DIIs, which include mutual funds, banks, insurance firms, and other institutional players, overtake FPIs for the fourth straight quarter, a feat achieved after a 21-year gap.

What the New Year holds

Looking ahead, market participants remain cautiously optimistic. “Valuations have turned comfortable,” says Agrawal, adding, the Nifty 50 now trades at 19-20x one-year forward earnings, well below its September 2024 peak. He expects selective pockets of the market to outperform, with benchmark indices delivering 10-12% returns over the next 12 months.

On sector opportunities, Agrawal sees outperformance potential in auto and auto ancillaries, telecom, banks and non-banking financial companies (NBFCs), asset management companies (AMCs) and wealth managers, metals and mining, new-age businesses, hotels, jewellery, liquor, dairy products, railway wagons, oil marketing companies (OMCs), IT and pharma-contract development and manufacturing organisation (CDMO).

Shrikant Chouhan, head of equity research at Kotak Securities, also remains constructive on Indian equities, supported by strong macro fundamentals, government initiatives, and RBI rate cuts. “With inflation under control, growth is expected to remain healthy, and the Nifty 50 earnings, though subdued in recent quarters, are projected to improve in FY26.”

Over the medium to long term, Chouhan expects India to benefit from macro stability, favourable demographics, infrastructure spending, and technology adoption.

The Nifty 50 is expected to scale 29,120 by December 2026, supported by steady corporate earnings, easing macro pressures, and a resilient domestic economy. While earnings are expected to grow 8.2% in FY26, the expectation of a sharp 17.6% rise in FY27 is where the hope lies. Any disconnect from reality in the coming earnings season will give a sense of where the market is headed in the New Year.