India's Sensex Index Set for 8.7% Annual Gains in 2025 Driven by Domestic Economy

Mumbai | EcoPulse24

The BSE Sensex index in India is poised to end 2025 with annual gains of around 8.7%, despite ongoing pressures from foreign investment outflows. On the morning of the year's final trading session, the index rose by 242 points, or 0.3%, reaching 84,917 points, breaking a five-session losing streak.

This uptick was mainly driven by gains in the metals sector, after the Indian government imposed tariffs on selected steel imports for three years to protect and support local industry.

Metals Sector Leads the Gains

The metals index rose by about 1.2%, led by JSW Steel, which jumped 4.0%, followed by Jindal Steel with a 3.3% increase, and Tata Steel up 2.0%, providing clear support to the main index in a session marked by caution.

Ongoing Pressure from Foreign Investment Outflows

Despite the temporary rebound, gains remained limited due to continued foreign investor exits from Indian equities. Data showed foreign investors sold shares worth a record $18.5 billion in 2025, posing a significant challenge for the market.

On a monthly basis, the Indian stock market is set to post a decline of about 0.9% in December, reflecting continued selling pressure from foreign investors.

Monetary Policy and 2026 Outlook

Conversely, markets were supported by a slowdown in annual inflation, boosting expectations that the Reserve Bank of India (RBI) may cut its key repo rate in 2026 to support economic growth amid uncertainty over the US-India trade agreement.

US Federal Reserve rate cuts and expectations of further monetary easing next year have also improved sentiment for emerging markets, including India.

EcoPulse24 Analysis

According to EcoPulse24, Sensex's annual gains in 2025 reflect the strength of domestic factors supporting the market, despite major headwinds from foreign outflows. The Indian economy continues to benefit from robust internal demand, stable economic data, and government policies supporting strategic sectors like metals and industry.

Looking ahead to 2026, monetary policy will remain the key driver for the market. Any interest rate cuts by the RBI could help attract liquidity and mitigate the impact of foreign investment outflows. However, ongoing uncertainty around global trade and US relations could keep performance selective and volatile, making Indian equities attractive over the medium term, but requiring careful risk management.