How Did the Indian Stock Market Achieve 18% Annualized Returns Over 5 Years?
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Synopsis
The Indian stock market has outperformed global peers by achieving an impressive 18% annualized return over the last five years, according to a recent report. This achievement makes India a leader in market performance, significantly outpacing China and other emerging markets.
Key Takeaways
- Indian stock market achieved 18% annualized returns over five years.
- Outperformed China and other emerging markets.
- Small-cap stocks played a crucial role in market growth.
- Positive investor sentiment amid global uncertainties.
- Fiscal deficit target successfully met at 4.8% of GDP.
New Delhi, June 13 (NationPress) The Indian stock market has showcased remarkable performance over the past five years, achieving 18 percent annualized returns measured in US dollars—making it the leader among global markets, as reported on Friday. India's long-term outperformance is particularly notable, exceeding the 12 percent returns of global and developed markets, and more than quadrupling the performance of other emerging markets, according to data from the Bandhan Mutual Fund.
In stark contrast, China’s markets suffered a 2 percent decline in May 2025, marking it as one of the few major economies ending the month in the negative.
Small-cap stocks have been pivotal to India’s growth narrative, consistently outperforming in various timeframes—be it over the last three months, five years, or since the pandemic lows of March 2020.
Mid-cap stocks closely followed, while large-cap stocks lagged, indicating a growing risk appetite and increased participation from domestic investors across broader market segments, as highlighted in the report.
From March to May 2025, Indian equities rose by 16 percent, significantly outpacing the 5 percent gains in emerging markets and a mere 2 percent increase in developed and global markets.
The report emphasized that India continues to draw investor confidence despite existing global uncertainties and challenges.
The industrials, capital goods, and telecom sectors emerged as the top performers in May, buoyed by strong earnings and favorable policies.
Conversely, defensive sectors like FMCG, healthcare, and IT saw only modest gains, while utilities remained stable and metal stocks experienced a slight decline.
On the macroeconomic front, India's Services PMI improved in May, indicating a recovery within the services sector.
However, the Manufacturing PMI showed a slight decrease, suggesting a minor slowdown in industrial output.
A weaker US dollar, declining domestic interest rates, and earnings that largely met expectations also played a role in fostering positive market sentiment.
India successfully met its fiscal deficit target for FY25 at 4.8 percent of GDP, with further improvement forecasted at 4.4 percent for FY26.
Encouraging trends in inflation are also noted, with food inflation declining for six consecutive months, although core inflation saw a slight uptick.
Point of View
The Indian stock market's performance reflects resilience and adaptability in the face of global economic challenges. Its ability to outperform not only emerging markets but also developed economies showcases India's potential as a significant investment destination. The shift in investor sentiment towards small and mid-cap stocks indicates a promising trend for future growth.
NationPress
14/06/2025
Frequently Asked Questions
What are the annualized returns of the Indian stock market over the last five years?
The Indian stock market has achieved an impressive 18 percent annualized return in US dollar terms over the past five years.
How does India's stock market performance compare to other countries?
India's stock market outperformed both developed markets, which had returns of 12 percent, and other emerging markets by more than four times.
What sectors performed well in May 2025?
The industrials, capital goods, and telecom sectors were the top performers in May, supported by strong earnings.
What factors contributed to India's stock market growth?
Key factors include a weaker US dollar, easing domestic interest rates, robust earnings, and heightened investor confidence.
How did small-cap stocks perform compared to large-cap stocks?
Small-cap stocks led the growth trajectory in India, significantly outperforming large-cap stocks over various time periods.
