The year 2025 presented a complex picture for India's equity investors. While the number of people participating in the stock market through mutual funds saw a dramatic rise, the overall returns for the year were muted, with a clear divergence in performance based on company size.
The Surge in Retail Participation
Indians have been increasingly turning to the stock markets, not just as a hedge against inflation but as a viable path to wealth creation and building a retirement corpus. This trend accelerated significantly from 2021 onwards, fueled by strong historical returns. The adoption of Systematic Investment Plans (SIPs) became a disciplined strategy for many.
Data from Crisil Intelligence reveals a staggering jump: the count of mutual fund investor accounts soared from 98 million at the close of March 2021 to 235 million by the end of March 2025. This massive influx of retail money, however, entered a market facing significant headwinds in 2025.
A Year of Underwhelming Returns and Global Headwinds
Standing alone, 2025 proved to be a disappointing period for equity returns. A primary factor disrupting the global trading environment and, consequently, corporate fortunes worldwide was the tariff policies implemented by US President Donald Trump. This created uncertainty and volatility across international markets, impacting Indian equities as well.
An analysis of index returns between December 2024 and December 19, 2025, provides a clear snapshot of what worked and what didn't for investors during this period.
The Big Get Bigger: Large Caps Lead the Way
In a notable shift from typical market behaviour, where smaller companies often promise higher growth percentages, 2025 rewarded investors who bet on size and stability. The Indian market categorises companies by market capitalisation (share price multiplied by total shares), which indicates a firm's size.
The Nifty 50 index, comprising the top 50 companies by market cap, delivered a return of 10.1%. As the focus broadened to include smaller large-cap companies, the returns moderated. The Nifty 100 index gave 8.3%, the Nifty 200 returned 7.9%, and the broader Nifty 500 managed a gain of only 6.1%.
The scenario turned less favourable for mid-cap and small-cap investors. The Nifty Midcap 150 index, representing companies ranked 101 to 250 by market cap, yielded a modest 5.2% return. The most challenging outcome was reserved for small-cap enthusiasts.
The Nifty Smallcap 250 index, covering companies from rank 251 to 500, ended in negative territory. Its value on December 19, 2025, was over 7% lower than its level on December 20, 2024, highlighting the heightened risk and poor performance in the smallest segment of the market during a turbulent year.
This performance pattern underscores a flight to safety and quality amid global economic uncertainty. While the Indian investor base expanded remarkably, the year's market dynamics emphasised that in volatile times, established, large companies often provide more resilient returns compared to their smaller, more volatile counterparts.
