From stagnation to surge: 10 reasons the Indian market rallied hard

The Indian stock market spent most of 2025 moving sideways in a narrow and frustrating band.

- By Dr. Rajiv Khosla

Until early October, the Nifty 50 and the BSE Sensex delivered almost no returns. The Nifty oscillated between 22,800 and 25,200, while the Sensex repeatedly failed to clear 82,000. Foreign portfolio investors (FPIs) withdrew a staggering ₹1.4 lakh crore between January and August—the second-highest annual outflow ever recorded—keeping the benchmark indices flat to marginally negative for nearly ten months. Domestic retail investors and steady SIP inflows of ₹22,000-25,000 crore per month prevented a deeper slide but were not strong enough to generate sustained upward momentum. Only over the last six to seven weeks, roughly from October onward, has sentiment turned decisively positive. This late but sharp recovery has pushed both indices close to their lifetime highs. Yet the rally remains narrow, heavily concentrated in a few large-cap stocks, while mid- and small-caps are still 8-12 percent below their January 2025 peaks.

So what changed in the last 45-50 days to fuel this surge? A combination of ten domestic and global developments converged almost simultaneously, creating powerful upward momentum.

Corporate India delivered a surprisingly strong Q2 FY 26 earnings performance. Large-cap companies posted year-on-year earnings growth of 13 percent, while mid-caps reported an impressive 26 percent jump. Banking, IT, FMCG, oil and gas, cement, metals, and capital goods all recorded broad-based double-digit growth. These results boosted confidence across the market and helped attract over ₹50,000 crore in FPI inflows since October.