Indian stock market leads global charts, delivers 16% return in 3 months: Report

India has emerged as the best-performing equity market globally over the three months ending May 2025, delivering a 16% return in US dollar terms and far outpacing world (2%), developed (2%), and emerging market (5%) indices, according to Bandhan Mutual Fund’s June 2025 Market Outlook.

Over a longer five-year horizon, India continued to outperform with a robust 18% return, compared to 12% delivered by both world and developed markets, and more than four times the 4% return seen in emerging markets. The returns since the market low on March 20 also place India in the lead, with a 23% gain versus 18% for global indices.

Performance across market capitalisation segments further underscores India’s bullish momentum. Small caps emerged as the top performers with 21% gains over the last three months, 39% since March 20, and 36% over the past five years. Mid caps followed with 17%, 36%, and 32% gains across the respective timeframes. Large caps, though trailing, still posted solid double-digit returns—13% in three months, 26% since March 20, and 22% over five years.

While most global markets registered gains in May, China bucked the trend with a 2% decline. Sectorally, India’s industrials, capital goods, and telecom sectors posted strong double-digit growth, while defensive plays like FMCG, healthcare, and IT lagged. Metals ended slightly in the red, and utilities stayed flat.

India’s economic indicators offered a mixed picture. The Services Purchasing Managers' Index (PMI) showed a month-on-month improvement, pointing to continued recovery in the services sector. In contrast, the Manufacturing PMI saw a slight decline, signalling some cooling in factory activity.

A weaker US dollar, falling domestic interest rates, and broadly in-line corporate earnings helped sustain the equity rally. “We expect continued volatility during the next couple of quarters as the US continues to sign trade deals,” said Manish Gunwani, Head of Equities at Bandhan AMC. “While economic activity has remained strong due to the front-loading of global trade, there could be significant disruptions as the tariffs come into force. The domestic economy seems to be turning around and is much better placed than the global economy.”

On the macroeconomic front, India’s fiscal deficit for FY25 matched the revised estimate of 4.8% of GDP, while the FY26 target has been pegged at 4.4%. Inflation indicators remained benign, with food price momentum falling for the sixth straight month and an ‘above-normal’ monsoon forecast further boosting the outlook. Bank credit as of May 16, 2025, grew 9.8% year-on-year, while deposits were up 10%.

In a bid to accelerate growth, the Reserve Bank of India (RBI) surprised markets with a 50 basis point repo rate cut and a 100 basis point CRR reduction. “These moves signal a proactive monetary stance to ensure rapid transmission and sustained recovery,” said Suyash Choudhary, Head of Fixed Income at Bandhan AMC.

With strong domestic fundamentals and a favourable policy backdrop, India’s equity markets appear poised to maintain their outperformance against global peers.