Indian equities concluded 2025 with a historic underperformance, marking their worst showing against Asian peers in nearly three decades. Despite this relative weakness, the Indian Stock Market achieved a remarkable milestone by posting its tenth consecutive year of gains, joining an exclusive global club alongside Japan and Argentina.

Record Foreign Outflows Weigh on Performance

The Indian Stock Market faced unprecedented selling pressure from foreign institutional investors throughout 2025. The scale of foreign fund outflows reached historic proportions, significantly impacting market sentiment and performance.

The selling pressure was compounded by a weakening rupee that eroded returns for overseas investors. The lack of progress on trade negotiations with the US, which has imposed the highest tariff rates in Asia on India, contributed to the rupee testing multiple record lows throughout the year.

Market Performance and Structural Challenges

The NSE Nifty 50 Index demonstrated the market's mixed performance, rising 0.70% on the final trading day of 2025 while registering its first monthly decline since August. This performance represented the benchmark's most significant annual underperformance relative to regional markets since 1998.

Several structural factors contributed to the market's challenges. Elevated valuations, slowing earnings growth, and the absence of credible artificial intelligence-linked companies dampened investor sentiment. These factors particularly affected overseas investor confidence, leading to sustained selling pressure throughout the year.

Domestic Support Provides Market Stability

Despite foreign selling pressure, strong domestic institutional support proved instrumental in maintaining market stability. Local institutions demonstrated unwavering confidence by investing approximately ₹6.8 lakh crores into equities during 2025, effectively offsetting much of the foreign outflows.

This domestic support enabled the Indian Stock Market to achieve returns exceeding 10.00% for the year, maintaining its impressive streak of consecutive annual gains. The sustained local demand highlighted the growing maturity and depth of India's domestic investor base.

Future Outlook and Market Dynamics

Market strategists from leading global institutions, including Nomura Holdings Inc. and Citigroup Inc., maintain optimistic projections for Indian equities in 2026. Their expectations center on continued corporate earnings improvement and policy measures supporting domestic demand gaining traction.

However, near-term challenges persist. Historical data indicates the Nifty 50 Index typically loses an average of 1.10% in January, suggesting potential volatility in early 2026. Additionally, the booming initial public offering market is expected to continue diverting liquidity toward new listings, with forecasts from Kotak Mahindra Capital Co. and Goldman Sachs Group Inc. projecting IPO proceeds to exceed ₹2.1 lakh crores in the coming year.

The Indian Stock Market's ability to maintain its decade-long winning streak while facing significant headwinds demonstrates the underlying resilience of the domestic equity market, supported by strong local institutional participation and continued economic fundamentals.

Shares of InterGlobe Aviation , which operates IndiGo Airlines, are expected to be in focus following the receipt of a significant tax demand order from the Goods and Services Tax department. The airline has been served with a GST penalty order amounting to ₹458.26 crore by the Additional Commissioner of CGST – Delhi South Commissionerate, marking a major regulatory challenge for India's largest airline.

GST Penalty Details

The tax authorities have issued a comprehensive penalty covering multiple financial years, with the airline facing substantial financial implications from the regulatory action. According to the company's regulatory filing, the order was received on December 29.

The penalty pertains to GST demand along with interest and penalty on compensation received from foreign suppliers and the denial of Input Tax Credit. The GST department's order covers a five-year assessment period, representing one of the larger tax disputes in the aviation sector.

Company Response and Legal Strategy

InterGlobe Aviation has strongly contested the tax department's decision, describing the order as erroneous and not in accordance with applicable law. The airline has sought legal advice and intends to contest the order through appropriate legal channels, confirming it will pursue all available legal remedies against the order.

The company is already in appeal before the Commissioner (Appeals) in a similar matter for FY 2017-18, indicating an ongoing pattern of tax disputes with authorities. This demonstrates the airline's consistent approach to challenging what it considers legally flawed tax orders.

Additional Tax Matter

In a separate development, IndiGo also received another order from the Office of the Joint Commissioner, Lucknow, related to FY 2021-22. This order includes a penalty of ₹14.59 lakh following the denial of input tax credit and imposition of interest and penalty.

The company stated that it considers this order to be erroneous and intends to contest it before the relevant authority.

Financial Impact Assessment

Despite the substantial penalty amounts, InterGlobe Aviation has indicated confidence in its legal position. The company clarified that these developments do not have any significant impact on its financial, operational, or other business activities.

The airline's approach of contesting the orders through appropriate legal channels reflects standard industry practice when facing substantial tax demands. The outcome of these proceedings could set important precedents for similar cases in the aviation sector, particularly regarding compensation arrangements with foreign suppliers and input tax credit claims.