India's stock market rose 7% in 2025, lagging global peers due to weak AI exposure and $17.6B in foreign outflows, though domestic investors and private markets remain active.

India’s stock market has underperformed globally in 2025, rising just 7% compared to a 27% gain in the MSCI Asia ex-Japan index, largely due to limited exposure to artificial intelligence. With few pure-play AI companies, foreign investors pulled $17.6 billion from Indian equities, the second-highest outflow on record, citing weak near-term earnings and lack of AI momentum. In response, fund managers are shifting toward volatile high-growth sectors like renewables, digital platforms, and financial services. Domestic investors have stepped in, buying $65.2 billion in equities, while private markets show strong growth, especially in AI-driven startups, healthcare, and consumer tech. Despite overvaluation concerns and political volatility, global asset managers see long-term potential due to structural reforms, domestic consumption, and a robust primary market expected to raise over $18 billion in 2025.