Indian stock markets see annual negative returns for the first time since Covid-19

The Indian stock markets have consistently delivered gains each year since the sharp rebound after the Covid-19 crash in 2020. However, for the first time in these five years, the 12-month period—from late September 2024 to late September 2025—shows indices with negative returns.

Data for earlier September-to-September cycles all recorded positive growth, making this ​performance a clear deviation from the post-pandemic trend.

Between September 26, 2024, when the markets were at their peak, and now, the indices have declined by up to 7.51% year-on-year (YoY).

According to data from exchanges, the BSE Sensex fell by 5.5% YoY to 81,159 on September 25, 2025, down from 85,836 a year earlier. On the other hand, the Nifty50 also lost ground, slipping 5.05% YoY to 24,890 from 26,216 a year ago.

“Exactly one year ago, on September 26, 2024, the Nifty 50 closed at an all-time high. Since then, the benchmark has slipped by up to 5.5%, giving an impression of relative stability. But a deeper look across the broader market reveals a far more painful reality for investors," said Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities. 

Sheth highlighted that out of the top 750 listed stocks, only 245 have delivered positive returns, while a striking 485 stocks are in the red (20 stocks were listed after September 26, 2024). The median return is -11.56%, and the average return is -6.25%, highlighting that losses are more widespread than the index alone suggests. The pain is more severe in the broader universe.

“Around 254 stocks have lost over 20% of their value, while only 103 have managed to gain more than 20%. Mid-cap, small-cap, and micro-cap indices have all underperformed the Nifty, with declines ranging from -7% to -8% over the past year,” Sethi said.

According to exchange data, the mid-cap segment experienced even sharper declines. The BSE Midcap index dropped 7.51% year-on-year to 45,641 from 49,349 a year earlier. Smaller companies also faced significant pressure. The BSE SmallCap index fell 6.45% over the year to 53,372 as of September 25, 2025, compared with 57,051 a year earlier.

If one looks at the fall over the last year, it’s been caused by a combination of factors. “Strong DII and SIP inflows thankfully cushioned heavy FII sell-offs,” said Amit Suri, a mutual fund distributor and founder of AUM Wealth. “Valuations a year ago were stretched, corporate profits came under pressure from rising costs and weak demand, higher interest rates weighed on sentiment, and global uncertainties only added to the turbulence.”

Vaqarjaved Khan, Senior Fundamental Analyst, Angel One, said, “Many factors have led to the fall in Indian equities in 2025, starting from the tariff war happening between India and the US, Middle East tensions, and FPIs pulling out nearly ₹1.4 lakh crore from Indian equities, and earnings for certain sectors remain muted for Indian companies.”

Recently, the US announced a hike in H-1B visa fees, which affects the Indian IT sector, and imposed 100% tariffs on branded drugs imported into the US. Due to geopolitical and global macroeconomic headwinds, the USD/INR has depreciated significantly, thereby increasing the risk premium for India. All these factors also affect market sentiment.

Outlook

However, one should not forget that despite the headwinds, the Nifty50 has grown around 4% in the first nine months of 2025. “Going forward, all eyes will be on earnings from India Inc. and the betterment of the tariff situation between the US and India,” said Khan.

Earlier this year, the US imposed a 50% tariff on Indian goods. Negotiations to reduce these tariffs are expected to occur soon. Meanwhile, the US Fed lowered interest rates by 25 basis points (bps) and is anticipated to implement additional cuts of 25 bps each in 2025, which will increase liquidity in the global markets.

"If the global macro situation improves from here and the tariff war sees de-escalation, with earnings outlook improving, Indian equities can do well. If the situation persists, then sector rotation can happen into domestic consumption, the infra and capital goods sector," said Khan.

"I remain positive on the markets over the next 1–2 years. Large-caps are reasonably placed, while mid -and small-caps look slightly stretched. Strong domestic inflows are cushioning FII outflows, and if foreign investors return, we could see a revival and possibly new highs. With GST cuts and the festive season boosting consumption, the outlook looks encouraging," added Suri.

For investors, creating a resilient portfolio involves more than simply adding numerous stocks; it requires selecting the appropriate combination of assets. Genuine diversification is achieved by allocating investments across various categories that react differently to market fluctuations.

“Mindless diversification into more stocks or equity mutual funds doesn’t help. Unless you buy non-correlated assets like gold, silver, and bonds, your portfolio will bleed and go through these painful periods,” says Sheth.