Nifty hits record high, but half of its stocks do not rise in 2025. What’s next for investors?

Nifty reclaimed a fresh record high after 14 months, ending a long corrective phase driven by expensive valuations, heavy FII outflows, geopolitical risks and soft earnings. Despite this milestone, foreign investors are still significantly under-exposed to India, with their holdings at a 15-year low following sales of over ₹2 lakh crore this year.

Nifty’s 14-month wait for a new record is finally over as the index moved above 26,277, reclaiming the all-time high after 289 trading sessions. The rally marks a decisive reversal from the correction that began in September 2024 – a phase dominated by stretched valuations, continued FII selling, geopolitical tensions, the absence of a trade deal with the US and weaker than expected corporate earnings.

Due to these long-term pressures, Indian equities lagged most of their Asian peers. Foreign institutional and portfolio investors have sharply reduced their exposure to India in the past year, with 2025 to Rs. Their holdings in listed stocks fell to a 15-year low amid massive selling of Rs 2 lakh crore, NSE data showed. Notably, India remains significantly under-owned in terms of its growing prominence in EM indices—its weight has risen from 6% in 2009 to around 18%, yet lags behind allocations by EM investors, making India one of the most owned markets historically.

Despite today’s milestone, 23 out of 50 Nifty stocks are yet to hit their all-time highs and are still at least 10% below record levels.

In consumer and FMCG stocks, the correction has been the sharpest, with the trend being the most stretched, down 94% from its record high. Others include ITC, HUL and Asian Paints which are down about 20% from their peaks. Trent shares have crated 40 percent year-to-date and would need to nearly double to reclaim their October 2024 peak.

The IT pack also saw a meaningful decline, with Wipro, TCS, Infosys, HCL Tech and Tech Mahindra retreating by nearly 50% from their record highs.

PSU heavyweights including Coal India, ONGC, NTPC and Power Grid are up around 45%, while financial names like Jio Financial Services have also slipped to around 30% from peak levels.

In autos and industries, companies like Bajaj Auto are down nearly 40%, while healthcare and materials players—including Dr. Reddy’s Labs, Max Healthcare, Cipla, Ultratech Cement, Tata Steel and Apollo Hospitals—are down about 15% from their all-time highs.

What’s next?

Experts say the market formation has shifted to bullish mode in the short term given the positive technical formation since Nifty and Sensex claimed new highs. “This rally has fundamental support for potential earnings growth expected in Q3 and Q4 of FY26. The consumption boom seen in October will translate into impressive earnings growth. If the trend is sustained, even with a slight moderation after the festive season, the earnings growth will be good enough to warrant a bullish market going forward,” said Vija, Chief of St. Invest Vija.

But he cautioned that there is no room for a sharp sustained uptrend as valuations are still elevated. Expectations of a rate cut by the Fed and a possible Russia-Ukraine peace accord have improved sentiment for equity markets globally, he added.

The rally remains in the hands of only a few people. The broader market is also down 5% in 2025, unable to recoup its losses, while the midcap index is up barely 2% over the same period.

Even as headline indices hit new highs, experts warn that valuations in some segments remain unclear. With only a few heavyweight stocks driving the gains, a truly sustainable uptrend will emerge only when participation expands across the market.

(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)