India's Nifty has only increased by 5%, making it the worst-performing major market in a year. There are three reasons for this underperformance.

The Indian stock market's prospects seem to be getting better, according to ICICI Prudential's Monthly Market Outlook-Nov 2025 report.

Indian stock market: FPI outflows, inflation, uncertainty about US tariffs, worries about slowing global economy, policy divergence among key nations, and high domestic valuations are just a few of the challenges that the Indian market indices have faced over the past year.

The Indian stock market's prospects seem to be getting better, according to ICICI Prudential's Monthly Market Outlook report for this month. The next stage of growth is anticipated to be fueled by policy initiatives including GST reforms, income tax reductions, and liquidity support, while corporate earnings are increasing and domestic market volatility has decreased.

"We are now less cautious about stocks due to the evolving changes." However, high valuations may restrict short-term gains, and protracted trade uncertainty may put investor confidence to the test in the future, according to the analysis.

Comparison of market performance
The research also noted that, up until November 2025, the Indian stock market had been stable or in a downward trend for the previous year.

Index	1 year return in Nov' 24	1 year return in Nov' 25
Nifty 50	22%	5%
Nifty 100	31%	3%
Nifty Midcap 150	42%	3%
Nifty Smallcap 250	45%	-5%

Up to November 2024, the Nifty 100, Nifty Midcap 150, and Nifty Smallcap 250 all had impressive one-year returns of 31%, 42%, and 45%, respectively, indicating a significant market rise across all categories. This suggests that during that time, all three categories—large caps, midcaps, and small caps—performed remarkably well, perhaps due to positive economic momentum and investor optimism.

But after a year, things had drastically shifted. The Nifty 100 and Nifty Midcap 150 both produced marginal increases of only 3%, while the Nifty Smallcap 250 displayed a 5% decline, reflecting muted or negative one-year results.

Concurrently, the benchmark Nifty 50 index had a 5% increase, compared to a 22% increase at the same time last year.

Peers around the world perform better

India used to be one of the top three markets in terms of performance, but things changed and it eventually dropped to the bottom. As of November 2024, the US and Taiwan outperformed India with returns of 24% and 39%, respectively, but India's one-year gains had put it ahead of Japan, Hong Kong, China, the UK, and South Korea.

However, India is currently the worst-performing major worldwide market, with only a 5% increase. On the other hand, profits of 10–20% have been reported in the US, Eurozone, China, Russia, the UK, Taiwan, and Hong Kong; even greater returns have been reported in Japan and South Korea.

Why did the Indian stock market do worse than its international counterparts?

1. Appraisals
Based on their median P/E ratios, the Nifty 50, BSE Midcap, and BSE Smallcap are the three main indices whose valuation patterns are further compared in the ICICI Prudential study.

According to the brokerage business, valuations have moderated from their recent peaks but are still high. The median P/E of the Nifty 50 Index increased from roughly 32.1 in October 2024 to 33.2 in October 2025, indicating comparatively steady large-cap prices.

During the same period, the BSE Midcap Index saw a significant drop from its top of 48.8 to 41.6, suggesting a cooling of midcap prices.

In a same vein, the BSE Smallcap 250 Index had a significant retracement following a robust surge, falling from 45.3 to 37.7.

2. Slowdown in Earnings
According to the analysis, wages may rebound following a difficult period last year as policy support—such as GST, income tax, and interest rate reductions—strengthens.

The trend in PAT (Profit After Tax) Growth—3-Year CAGR—across current and future fiscal quarters was emphasized in the study. PAT CAGR peaked at 47% in Q1FY24 and 48% in Q2FY24, indicating a strong earnings recovery period. The data showed a strong profit rise in FY23 and FY24. The trend does, however, exhibit a discernible slowing in FY25, going negative at -1% in Q1FY25 and falling even lower to -6% in Q2FY25, indicating a difficult time for business profitability.

3. Outflows of FPI
According to the research, "FPIs are showing renewed interest in Indian equities after a year's pause, led by external factors such as a) Overcrowding in Korea and Taiwan b) Weak USD along with rate cuts c) US Tariff impacts prove short-lived and d) Moderating valuations."

The trajectory of foreign portfolio investment (FPI) flows in India (measured in INR crore) between September 2024 and October 2025 was also depicted in the research. During this time, the data shows notable variations. FPIs experienced one of the largest decreases in October 2024, following a robust influx in September 2024.

A fresh increase in FPI inflows was observed by October 2025, indicating a resurgence of interest in Indian stocks.