The Indian stock market ended 2025 on a resounding high, with the Sensex rising 545 points to close at 85,220.60 and the Nifty reclaiming the 26,000 mark to settle at 26,129.60 on Wednesday, December 31. This robust rally snapped a five-session losing streak for the Sensex, providing a cheerful send-off for the year and setting a positive tone for 2026.
Market Highlights: A Broad-Based Recovery
The final trading session of 2025 witnessed a broad-based upswing. Key performers included:
- Top Gainers: Metal and banking stocks led the charge. JSW Steel surged nearly 5%, while Tata Steel, Kotak Mahindra Bank, and Reliance Industries also posted significant gains.
- Sectoral Surge: All sectoral indices ended in the green. The Nifty Oil & Gas and Nifty Metal indices were standout performers, jumping 2.63% and over 1.5%, respectively.
- Market Breadth: Reflecting widespread optimism, 26 of the 30 Sensex stocks closed higher, and over 2,700 stocks advanced on the BSE.
Why Did the Market Rally? Key Drivers
Analysts point to a confluence of domestic and global factors that fueled the year-end surge:
1. Government Policy Boost: A major catalyst was the government's announcement of a three-year safeguard duty of approximately 12% on select steel imports. This move, aimed at protecting domestic manufacturers from cheaper overseas supply, triggered a powerful rally in metal stocks.
2. Attractive Valuations & Value Buying: The recent market correction, with the Sensex falling for five consecutive sessions, presented attractive entry points. Traders engaged in strategic bargain-hunting, which provided a solid floor for prices.
3. Supportive Global Cues: Easing global crude oil prices (with Brent crude down over 10% in 2025) helped soothe inflationary concerns for a net-oil-importing economy like India. Furthermore, other Asian markets like South Korea's KOSPI and Hong Kong's Hang Seng posted stellar annual gains, contributing to a positive regional sentiment.
Behind the Scenes: Domestic Investors Take the Lead
A defining narrative of recent months has been the contrasting behavior of foreign and domestic institutional investors:
- Foreign Institutional Investors (FIIs) remained net sellers, offloading shares worth ₹3,844 crore on December 30 alone. For the full month of December, their net selling exceeded a massive ₹30,750 crore.
- Domestic Institutional Investors (DIIs) provided a powerful counterbalance. On December 30, they were net buyers to the tune of ₹6,160 crore, continuing a trend of strong domestic support that has absorbed the FII selling pressure.
Table: Institutional Activity Snapshot (as of Dec 30)
| Institutional Investor | Activity on Dec 30 | Net Activity in Dec 2025 |
| Foreign Institutional Investors (FIIs) | Sold ₹3,844 crore | Sold ₹30,752 crore |
| Domestic Institutional Investors (DIIs) | Bought ₹6,160 crore | Bought ₹72,860 crore |
Looking Ahead to 2026: Cautious Optimism Prevails
As the calendar turns, market experts express cautious optimism tempered by clear watchpoints. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, notes that while the market has upward potential, it is weighed down by sustained FII selling and a lack of fresh triggers.
The focus for early 2026 will be firmly on:
- Corporate Earnings: The upcoming Q3 results are seen as critical. "Earnings growth will be the single most important factor determining the market trend in 2026," asserts Vijayakumar.
- Policy & Global Events: Key events include the Union Budget, auto sales data, and developments in the India-US trade deal. Global factors like the US Federal Reserve's monetary policy path will also be closely monitored.
Brokerage firm Geojit has set a base case Nifty target of 29,150 for December 2026, implying an 11-12% potential upside from current levels, underpinned by expectations of an earnings recovery and a pickup in private investment.
In summary, the Indian equity markets closed a volatile but rewarding 2025 with a display of strength, powered by policy support and resilient domestic liquidity. While challenges remain, the stage is set for a new year where fundamentals like corporate earnings are expected to reclaim center stage.
