Indian stock market gives 18% returns in five years, beats China, other global market peers; small-cap stocks outperform

India has emerged as the top-performing equity market globally, significantly surpassing both developed and emerging markets in both short and long-term evaluations, as noted in Bandhan Mutual Fund’s Monthly Market Outlook for June 2025. For the quarter ending in May 2025, Indian equities achieved a 16% return, compared to a 5% increase in emerging markets and a mere 2% in developed markets. Looking at a five-year perspective, Indian markets delivered annualized returns of 18% when measured in United States (US) dollar terms, well exceeding the 12% returns from global and developed markets and more than quadrupling the gains from emerging markets. In contrast, China experienced a 2% decline in May, highlighting India's comparative strength. When broken down by segments, small-cap stocks have outperformed across all timeframes, yielding a 36% return over the past five years, followed by mid-caps at 32% and large-caps at 22%. Sector-wise, industries like industrials, capital goods, and telecom excelled in May, whereas defensive sectors such as Fast-Moving Consumer Goods (FMCG), healthcare, and Information Technology (IT) showed modest gains. On the macroeconomic front, India's fiscal deficit for FY25 successfully met the adjusted target of 4.8% of Gross Domestic Product (GDP), with FY26 projected at 4.4%, demonstrating ongoing fiscal responsibility. An encouraging monsoon forecast is anticipated to relieve food inflation pressures, with the food consumer price index (CPI) falling for the sixth consecutive month.