2025 Investments Wrap: From T20 to Test Cricket

If the years 2023 and 2024 were a high-scoring T20 match where every batsman (stock) was hitting sixes, 2025 was a Test Match that had just started. The pitch had swing, the bowlers were aggressive, and only the players with solid technique survived.

For the seasoned investors, 2025 wasn't bad - it was normal. However, for the newcomers, it could be a wake-up call as they met with volatility and flat markets.

As we close the ledger on 2025, let’s look back on what worked, what failed, and what to expect next.

Stock indices: The benchmarks

Not a very encouraging scenario, but not bad either, as markets largely remained flat and range-bound because of valuation concerns and tight earnings.

Annual Returns Data as of 30 Dec 2025:

What Worked in 2025?

1. Gold & Silver: The Silent Guardians and Rockstars of 2025

   With geopolitical tensions simmering across the globe, volatile equity markets, and central banks rushing for gold purchases, Gold acted exactly as it should - a hedge. It rallied by more than 70%. Silver, on the other hand, witnessed higher industrial demand, tight supply, and sentiment based rally. Silver rocketed by more than 150%+. For the portfolios with Gold and Silver, they got protected and made good returns (E.g. multi-asset funds).

2. Large Caps & International Allocation: While Small Caps corrected or remained flat due to expensive valuations, Large Cap companies (The Top 50-100) provided stability. In uncertain times, money flows to safety. Investors realized that a 10% stable return is better than a volatile -5% in small caps.

   The Lesson: Never disrespect the "boring" funds or asset allocation. They are your portfolio's immune system.

Have a look at the Mutual Fund Category Returns:

What DIDn't Work?

1. Small and Mid Caps

   While Small and Mid Cap companies can bring more growth to your portfolio in the long term, their 'risky' nature was on display during 2025. Mid-caps stay afloat, but small-caps dragged portfolios downwards.

   If any of your funds have a larger allocation to small caps, it would have seen red for the last 1 year's returns. Flexi caps having more allocation to small caps is one such example.

   
   

2. Sector Chasing

   Investors who bought Sectoral/Thematic Funds without a plan or long-term strategy, based on past 1-year returns, saw the law of averages kick in, and they massively underperformed, except for a few sectors like BFSI.

The Mixed Bag

1. International Markets

   • The US: Despite fears of recession, the US markets - driven specifically by the AI revolution (Artificial Intelligence) - continued to defy gravity.

   • Europe: Struggled with slow growth and energy transitions.

   • China: Showed signs of recovery but remained unpredictable due to policy shifts

   • India: Remained the "Best House in a Bad Neighborhood." While we were expensive, we were still the fastest-growing major economy.

2. Debt Instruments: "The Come-back Kid"

   With interest rates hovering at attractive levels, Fixed Income (Debt Funds/Bonds) gained importance. The returns from these asset classes were not exorbitant, but helped stabilize the overall portfolio.

Multi-asset funds outperformed in the race this year, benefiting from the gains of Gold and silver.

The road ahead: 2026

The year 2025 taught us that Gravity Exists. The real value of a year-end review is not in saying "Sensex was X, Nifty gave Y, US market gave Z”, It is in asking “What did I do when markets moved?”.

Looking into 2026, the backdrop remains broadly supportive: India’s growth, stable inflation, and an RBI that has room but no urgency to cut rates all indicate earnings visibility. However, valuations in pockets of equity markets are still elevated relative to history. Equity markets path would rely on earnings growth delivery, and till then, there is a risk of volatility.

For retail investors, the focus should remain on:

• The market is no longer cheap. Sticking to asset allocation rather than timing sectors

• Using disciplined investments to average into equities, especially in mid/small caps. Large caps have more potential, while small/mid caps are still not out of the rut and remain risky

• Expect Realistic Returns around 10-14%. But do not interrupt compounding during boring phases.

Happy Investing! And, a very Happy New Year 2026!