V Keshavdev

The current calendar could well see domestic equities creating a record — of the low kind. As of November-end, India’s weight in the global equity market cap stakes has slipped to a two-year low, even as the Nifty 50 hit a fresh all-time high.

India’s total market capitalisation at $5.3 trillion was below the $5.7 trillion peak seen in September 2024, according to a report by Motilal Oswal, highlighting the growing divergence between benchmark index strength and the broader market. As a result, India’s share in the global mcap fell sharply to 3.6% of November-end 2025, sliding from the peak of 4.7% seen in September 2024 (See: Low and behold). While India had outperformed most global peers for two consecutive years, a global rebound has outpaced it decisively in recent months.

The Nifty, after hitting a record high of 26,203 on Nov 29, did lose some steam, hovering around 25,934 levels as of 1.19 PM. Yet, the index masks an increasingly narrow rally, with only 18 stocks hitting all-time highs in the past two months, and 26 stocks scaling lifetime highs in CY25.

Much of the benchmark’s gains have been concentrated in a handful of large-cap names, while the wider universe of stocks has lagged. The index’s 12-month rolling return of 9% has been range-bound and below its long-term average of 16%, underscoring a broad market that has yet to regain momentum despite the strength in index heavyweights.

That’s not surprising.

Nifty-50 earnings continue to show signs of fatigue, delivering a sixth straight quarter of single-digit profit after tax growth, with the latest quarter’s profits rising just 2% year-on-year, slightly below expectations of 3%. Despite this tepid earnings trajectory, valuations remain rich.

The Nifty-50’s one-year forward P/E stands at 21.5x, is about 4% above the long-period average of 20.8x, indicating that investors are still willing to pay a premium for large-cap stability. In contrast, valuations in the broader market are even more stretched, with the Nifty Midcap-100 trading at 28.3x and the Nifty Smallcap-100 at 25.9x, representing steep premiums of around 26% and 50% to their long-term averages, respectively, states the report. The earnings-valuation disconnect has added to concerns about the sustainability of the rally, particularly in the mid- and small-cap segments.

Even as foreign investors headed for the exit, domestic investors emerged as the dominant force. Strong mutual fund inflows and buoyant primary markets led to a historic ownership shift in March 2025, when DII holdings in Nifty-500 companies surpassed FII holdings for the first time. The trend strengthened further, reflecting sustained retail and institutional domestic interest. As of end-September 2025, promoter holdings are at an all-time low of 49.3%, and so is FII ownership at 18.3%. Public ownership, though, has been steady at 12.4% in the NSE 500 universe.

The combination of narrow index breadth, weak earnings, and lofty valuations helps explain why India’s aggregate market cap has remained flat, even as the Nifty continues to climb.

The next leg of sustainable upside will require broader earnings strength and wider market participation. Until then, India’s equity markets may continue to defy global trends while masking the underlying fragility across the broader market.