The Indian stock market concluded 2025 with the Nifty achieving a historic milestone of 10 consecutive winning years, gaining 10.50% despite navigating through challenging global conditions including India-Pakistan tensions, Trump tariffs, and rupee depreciation beyond 91 against the dollar.

Market Performance Overview

The benchmark indices delivered moderate gains while individual stocks and sectors showed dramatic variations. The NSE Nifty 50's performance was supported by strong rallies in financials and automotive sectors, even as small-cap stocks declined 6.00%.

Top Nifty 50 Winners and Losers

Among Nifty 50 constituents, financial services and automotive stocks dominated the winners' list, while retail and technology stocks faced significant pressure.

Broader Market Performance

The mid-cap and small-cap segments exhibited even sharper contrasts, with some stocks delivering exceptional returns while others faced steep declines.

In the Nifty Midcap 100, L&T Finance surged 131.00%, Aditya Birla Capital doubled with 100.00% gains, and AU Small Finance Bank jumped 80.00%. Conversely, Oracle Financial Services plunged 40.00%, Premier Energies declined 37.00%, and Kalyan Jewellers fell 36.00%.

Sectoral Performance Analysis

Sectoral trends revealed clear winners and laggards, with traditional sectors outperforming technology and consumer discretionary segments.

Market Resilience and Structural Factors

Despite facing substantial foreign institutional investor selling of approximately $18.00 billion, domestic investor participation remained robust with SIP flows reaching ₹3.20 lakh crore during the calendar year.

"That is an exceptionally rare feat in markets. Typically, markets have a negative year every third year or so," said Sunil Sharma, Chief Investment Strategist at Ambit Global Private Client. "This data point highlights India's consistent, structural growth, continual reform mindset of the government, the strong demographics of the country, as well as the financialization trend driving ever-rising flows into the markets."

Looking Ahead

Market consensus suggests optimistic targets for 2026, with leading brokerages setting Nifty targets around 29,000 levels. However, experts advise maintaining focus on quality companies with strong fundamentals at reasonable valuations rather than chasing speculative returns, particularly given the mixed performance across market segments in 2025.

The National Stock Exchange has officially welcomed Yes Bank and Union Bank into the Bank Nifty index effective December 31, marking a significant structural change mandated by market regulator SEBI. This expansion transforms the index from its current 12 constituents to accommodate 14 lenders, representing a substantial shift in the banking sector's benchmark composition.

Expected Fund Flows from New Additions

According to Nuvama Institutional Equities projections, the inclusion of these two lenders is expected to generate substantial investment inflows:

Beyond the new entrants, several existing constituents are positioned to benefit from weight increases. Federal Bank, IDFC First Bank, Punjab National Bank, IndusInd Bank, and AU Small Finance Bank are projected to see estimated inflows ranging from $11 million to $16 million each.

Major Outflows Expected from Top Banks

The restructuring will not benefit all constituents equally, with significant outflows projected for the index's largest components:

These substantial withdrawals reflect the rebalancing requirements imposed by the new regulatory framework.

Regulatory Framework and Weight Caps

The additions stem from SEBI's directive requiring exchanges to maintain at least 14 stocks in non-benchmark indices such as BSE's Bankex and NSE's Bank Nifty and Finnifty that are eligible for derivatives trading. The regulator has also established limits on individual stock weights and the top three constituents to reduce the influence of any single stock or group of stocks on the indices.

NSE has implemented a 43% cap on the combined weight of the top three Bank Nifty constituents—HDFC Bank, ICICI Bank, and State Bank of India—down from the current 60%. This adjustment will be executed through four equal monthly phases between December and March, triggering portfolio rebalancing and likely outflows from passive funds, including index funds and ETFs tracking the Bank Nifty.

Impact on Nifty 50 Index

The broader Nifty index is also experiencing rebalancing effects. Bharti Airtel emerges as a key beneficiary with projected inflows of approximately $59 million, while Eternal is expected to attract nearly $29 million in inflows.

Other stocks including IndiGo, Mahindra & Mahindra, and HDFC Bank are estimated to attract inflows in the $8–18 million range. Conversely, Infosys faces the largest projected outflows of approximately $78 million, while Adani Ports could see outflows of around $32 million. Reliance Industries, HCL Technologies, and Bajaj Finance are expected to experience modest reductions in their index weights.