Indian equity markets concluded 2025 on a positive note, with the final trading session showing strong recovery momentum. The BSE Sensex climbed over 545 points or 0.64% to end at 85,220.60, while the NSE Nifty 50 advanced nearly 191 points or 0.74% to close at 26,129.60, snapping multiple sessions of losses.

Despite the strong finish, the year will be remembered more for resilience than outperformance, as Indian equities lagged most global and emerging market peers amid challenging domestic and global headwinds.

Annual Performance Overview

The Nifty ended 2025 up 10.70%, managing to stay positive despite appearing subdued compared to the strong rally seen over the past five to six years. The performance stood out as weaker in relative terms, with India significantly underperforming several major global indices.

Currency weakness further eroded returns, with the Indian rupee emerging as the weakest-performing currency in Asia. On a dollar-adjusted basis, the Nifty's gains narrowed to roughly 5.50%—nearly half the headline return.

Final Trading Session Recovery

The year-end rally was broad-based, with metal stocks leading gains following the government's decision to impose a three-year safeguard duty on select steel imports. The oil & gas sector also outperformed on expectations of stable demand and stronger refining margins.

Market analysts noted that the recovery reflected improving sentiment, with expectations rising for a constructive rebound in the coming year supported by improving demand conditions.

Market Headwinds and Challenges

Markets navigated heightened uncertainty throughout the year. The Iran-Israel conflict at the start of 2025 set a challenging tone, followed by domestic disruptions. Prolonged uncertainty around US trade policy, marked by tariff actions and lack of clarity on trade deals, compounded geopolitical pressures.

Domestically, muted demand in the first half weighed on corporate earnings. Heavy foreign portfolio investor selling added further pressure, leading to rupee weakness toward year-end.

Investment Flows and Market Dynamics

Despite weak equity performance, investor behavior remained mixed. The year witnessed contrasting flow patterns that shaped market dynamics.

Domestic investors continued playing a stabilizing role, with Systematic Investment Plan inflows averaging nearly $3.00 billion monthly, providing steady support and helping benchmark indices stay positive.

Precious Metals Outshine Equities

While equities disappointed, precious metals delivered standout performances. Gold and silver emerged as the year's biggest winners, aided by global uncertainty and currency depreciation. Silver recorded a historic rally, rising over 160.00%—its strongest performance since the early 1970s.

Technical Outlook and Market Activity

Technical analysts noted positive momentum on the final trading day, with the Nifty witnessing a doji formation followed by a sharp rise. The index reclaimed the 21 EMA after reversing from a brief dull phase, suggesting potential for continued recovery.

Over 126 stocks hit their 52-week highs, while 145 stocks slipped to their 52-week lows, with market sentiment remaining bullish as 2,799 stocks advanced compared to 1,413 declines.

Outlook for 2026

As markets head into 2026, analysts expect investor sentiment to hinge on corporate earnings and potential uptick in nominal GDP growth. A potential US-India trade deal could provide meaningful boost, while corporate earnings recovery appears plausible given recent government measures. The crowded IPO pipeline will continue shaping market dynamics, with expectations of a constructive rebound supported by improving demand conditions.

The Nifty 50 index concluded the final monthly expiry of the year on a flat note, closing marginally lower by 3.25 points at 25,938.85 points. The benchmark index experienced a range-bound session characterized by a "tug of war" between bulls and bears, with global holidays and New Year's Eve anticipation keeping investors largely on the sidelines.

Year-End Expiry Patterns and Market Dynamics

The final monthly expiry session reflected typical year-end market behavior, with reduced participation and sideways movement dominating trading patterns. Siddhartha Khemka, head of research at Motilal Oswal Financial Services, attributed the subdued activity to global holidays and anticipation surrounding New Year's Eve celebrations.

The broader market faced slight pressure during the session, with both midcap and smallcap indices declining. However, selective sectoral strength in Metal and Auto segments provided cushion against foreign institutional investor selling and year-end lethargy.

Technical Analysis and Candlestick Patterns

The Nifty formed significant technical patterns during the session, creating a "bullish pinbar" and "Doji" candlestick formation on daily charts. These patterns reflect market indecision following a four-session decline and suggest potential for directional clarity in upcoming sessions.

Osho Krishan, chief manager of technical and derivative research at Angel One, highlighted that the index is currently positioned between its 20-day and 50-day exponential moving averages, creating a neutral technical setup.

Strategic Outlook and Trading Recommendations

Analysts recommend maintaining a cautious approach with light directional bets given the current market structure. Angel One identifies significant resistance between 26,100 and 26,150, while Bajaj Broking Research emphasizes that a decisive breakout above 26,300 is essential to trigger upside momentum toward 26,500.

The immediate support zone is positioned at 25,900 to 25,850, with Bajaj Broking pointing to 25,700 to 25,800 as the critical floor that must be maintained to preserve a neutral-to-positive market outlook.

Sectoral Performance and Bank Nifty Strength

In contrast to the headline index's flat performance, Bank Nifty demonstrated relative strength by forming a "bullish engulfing" candlestick pattern, indicating strong buying interest at lower levels. The Nifty Metal index emerged as the session's standout performer, surging 2.00% to achieve a fresh all-time high of 11,029 points.

Bajaj Broking expects Bank Nifty to establish a base within the 58,500-60,100 range, with immediate resistance at 59,300 to 59,500. A breakout above 59,500 could facilitate movement toward the recent all-time high of 60,100.

Market Outlook for Final Trading Day

Looking ahead to the final trading day of the year, market participants will closely monitor the US FOMC meeting minutes and domestic pre-quarterly business updates for directional cues. Siddhartha Khemka expects markets to remain in sideways mode, while Osho Krishan advises focusing on selective thematic players for potential outperformance opportunities.