Summary of this article
The year 2025 was marked by volatility and consolidation
Large-caps consistently outperformed mid-and small-cap segments
Gold emerged as the preferred asset for investors and central banks
For retail investors, 2025 was a year that tested patience. Markets moved in sharp bursts up one month, down the next as global headlines swung between trade tensions, rate cuts and geopolitical stress. Yet beneath the noise, a clearer investment story began to emerge.
“The year 2025 was marked by volatility and consolidation across the global and Indian markets,” says Ritesh Taksali, Chief Investment Officer, Edelweiss Life Insurance. According to him, the trigger was a mix of geopolitical conflicts, shifting trade policies and uncertainty around growth and inflation.
The return of Donald Trump as U.S. President brought higher tariffs and fears of a global slowdown. But those fears did not fully materialise. “Strong spending on artificial intelligence (AI)… helped offset these headwinds,” says Ritesh Taksali. As a result, markets oscillated sharply, but ended the year on a positive note, with the Nifty 50 up 10.1 per cent as of mid-December.
Globally, cooling inflation allowed central banks to cut rates. The U.S. Federal Reserve cut rates by 75 basis points, while Europe and the UK followed with deeper cuts. However, rising fiscal deficits kept long-term bond yields elevated. “Global governments’ inability to fully unwind post-Covid stimulus added to this pressure,” says Ritesh Taksali.
Gold stood out as a clear winner. “Gold emerged as the preferred asset for investors and central banks amid these uncertainties,” says Ritesh Taksali, as concerns over inflation, geopolitics and central bank independence reduced reliance on dollar assets.
In India, falling inflation gave policymakers room to act. Headline inflation dropped sharply, prompting the MPC to cut rates by 125 basis points. “With benign inflation projection, the MPC cut policy rates… and ensured adequate liquidity,” says Ritesh Taksali. India’s macro stability was further recognised when S&P upgraded India’s sovereign rating in August 2025.
For equity investors, leadership narrowed. Large-cap stocks consistently outperformed mid-and small-cap segments, reflecting investor preference for liquidity and balance sheet strength. Small-cap indices declined 7.2 per cent, while the top 10 Nifty stock returned 14.0 per cent outperforming the broader index’s 10.1 per cent gain.
With valuations moderating and policy support in place, the outlook looks constructive. “With inflation trending below RBI’s target and policy settings supportive,” says Ritesh Taksali, “valuations present a constructive backdrop for long-term investors.”
For retail investors, 2025 reinforced a familiar lesson: volatility is inevitable, but staying invested through cycles continues to create opportunity.
