Mumbai  India  June 13, 2025:  India has been the top performing market globally over the 3 months ending May 2025, significantly outperforming the emerging markets index and the world and developed market indices. As compared to a 16% gain for India, world and developed markets rose by a meagre 2% while emerging markets rose 5% in the 3-month period ending May 2025, says the latest Bandhan Mutual Fund Monthly Market Outlook.

India is also the top performing market over a longer period of 5 years, delivering US dollar returns of 18%, beating the 12% return of the world and developed markets and delivering more than 4X the emerging market returns. According to the Bandhan Mutual Fund Market Outlook, India’s returns from the lows hit on March 20 (see table below)

In May, China stood out amongst major markets globally by falling 2%, whilst other major global markets saw gains.

In terms of market capitalisation, small caps have given the best returns over the last 3 months, 5 years and since March 2020. Mid caps were the second-best-performing capitalisation category over the same period, followed by the large caps (see table below).

In May 2025, while most sectoral indices showed gains, utilities gave almost flat returns, while metals were marginally negative. In contrast, industrials, capital goods and telecom all delivered double-digit gains in May, while the lowest positive gains in the sector were delivered by the traditionally defensive sectors of FMCG, Healthcare and IT.

India’s Services Purchasing Manager’s Index (PMI) increased m-o-m, indicating a service sector recovery. Conversely, the Manufacturing PMI declined m-o-m, indicating a slowdown in the manufacturing sector. Continued weakness in the US$, falling interest rates in the domestic economy, and earnings broadly in line with muted expectations helped drive the market higher in May 2025, said the fund house in its June 2025 market outlook.

“We expect continued volatility during the next couple of quarters, as the US continues to sign trade deals. While economic activity has remained strong due to the front-loading of global trade, there could be significant disruptions as the tariffs come into force. The domestic economy seems to be turning around and is much better placed than the global economy,” said Manish Gunwani, Head Equities, Bandhan AMC.

On the fiscal front, India’s FY25 central government accounts met the revised estimate of 4.8% of GDP, with the FY26 deficit budgeted at 4.4%. Inflation data showed negative momentum in CPI food prices for the sixth consecutive month, and core inflation inched up. The India Meteorological Department (IMD) forecasts an ‘above-normal’ southwest monsoon, contributing to a benign inflation outlook. Bank credit outstanding as of May 16, 2025 grew 9.8% YoY, with deposits up 10% YoY.

“The recent surprise 50 bps rate cut and 100 bps CRR cut by the RBI underscore a proactive stance to ensure rapid monetary transmission, aiming to support growth, said Suyash Choudhary, Head fixed income, Bandhan AMC.