India Tops Global Equity Charts with Highest Returns Over 5 Years: Bandhan MF Report
The Indian stock market has emerged as the best-performing equity market globally over the past five years, delivering 18% annualised returns in US dollar terms, according to a new report released by Bandhan Mutual Fund on Friday. This return not only surpasses those of global and developed markets but also leaves other emerging markets far behind. In comparison, world and developed markets yielded around 12% annualised returns, while other emerging markets significantly underperformed. The stark contrast is especially evident when compared with China, whose markets slipped 2% in May 2025, making it one of the few major economies to post a monthly decline.
Small-Caps Lead India’s Market Rally
India’s bullish run has been broad-based, but small-cap stocks have led the charge, outperforming across all key timeframes — the past three months, five years, and since the pandemic lows in March 2020.
Mid-caps followed closely, while large-cap stocks trailed, signaling a rising risk appetite among investors and the growing participation of domestic retail investors in broader market segments. Between March and May 2025, Indian equities surged 16%, outpacing 5% gains in emerging markets and just 2% in developed and world markets, the report highlighted.
Sectors Driving the Upsurge
The industrials, capital goods, and telecom sectors emerged as top performers in May, buoyed by strong corporate earnings and policy tailwinds. In contrast, traditionally defensive sectors such as FMCG, healthcare, and IT saw modest gains, utilities remained flat, and metal stocks witnessed a slight decline.
Macro Indicators Support Optimism
Several macroeconomic factors have underpinned India’s strong market sentiment:
- Services PMI rose in May, signaling continued recovery in the services sector.
- Manufacturing PMI saw a marginal dip, indicating a slight industrial slowdown.
- India’s fiscal deficit for FY25 met its target of 4.8% of GDP, with FY26 projected to improve further to 4.4%.
- Food inflation has eased for six consecutive months, though core inflation saw a slight uptick.
- A weaker US dollar, easing domestic interest rates, and corporate earnings that met expectations also contributed to the positive outlook.
Investor Confidence Remains High
The report concludes that India remains a top destination for global and domestic investors, supported by macroeconomic stability, robust corporate earnings, and favorable policy frameworks. As geopolitical uncertainties and global market volatility continue, India’s structural growth story and consistent outperformance stand out.
