Summary: The Indian stock market has remained largely range-bound for the past 18 months, with the Sensex trading around levels seen in May 2024 despite briefly crossing 85,000 in December 2025. According to the analysis, market stagnation has been influenced by geopolitical tensions, tariff-related uncertainties, and the 2024 increase in capital gains taxes, which contributed to significant foreign institutional investor (FII) outflows. At the same time, domestic investors continued investing heavily through mutual fund SIPs, although long-term returns have gradually moderated and recent returns have been relatively low. The government has attempted to support businesses through targeted GST adjustments and tax-related measures aimed at reducing cost pressures. Rising crude oil prices and currency depreciation have also weighed on market sentiment. However, corporate earnings have continued to grow while stock prices have largely consolidated. The current phase is described as a time correction, with expectations that improved global conditions and a return of FII flows could support future market growth.
1. Sailing in a Doldrums Position for the Last 18 Months
The share market has hit a unique bottleneck. The Sensex is currently hovering around the 74,500–75,000 mark—effectively the same level it saw back in May 2024. While the market rallied sharply to cross 85,000 in December 2025, geopolitical conflicts, global tariff uncertainties, and domestic shifts have triggered a persistent instability.
A major catalyst for this stagnation was the 2024 increase in capital gains taxes (Short-Term Capital Gains raised to 20% and Long-Term Capital Gains to 12.5%). Foreign Institutional Investors (FIIs) took this poorly, shifting into aggressive withdrawal mode rather than expanding their Indian portfolios. Donald Trump’s aggressive tariff policies further prolonged this scenario.
Despite muted market growth, massive domestic capital has been systematically pumped into mutual funds via retail SIPs, driven by an unwavering hope for better returns. Long-term investors have seen average mutual fund returns systematically compressed from historical highs of 24% to 18% down to 13% to 9%—with sequential returns over the last two years reaching at a mere 2% to 3%.
2. Various entitative Taken by the Government
Indian corporations are fundamentally resilient, shielded heavily by massive, organic domestic demand. To combat global macroeconomic pressures, the government has executed critical policy calibrations:
- Targeted GST Adjustments: Specific GST rate cuts have been deployed to offset foreign tariffs, giving vital breathing room (“oxygen”) to Indian companies struggling to maintain export margins.
3. What Next?
- High global crude prices have led to heavier energy import bills, putting structural pressure on the Indian Rupee, which has faced depreciation. Simultaneously, FIIs have pulled billions out of domestic equities to chase yields in other global markets.
- However, the tide is quietly turning. The government has already taken steps to curb non-essential gold and silver imports to manage the current account deficit. The logical next fiscal pivot to look for is a potential rationalization or simplification of capital gains taxation (STCG/LTCG) to make Indian equities undeniably attractive again. The government has used tax-related measures, including key excise duty cuts, to insulate corporate India from runaway fuel and energy overheads.
4. The next story
The market is currently standing at an inflection point. Corporate earnings have continued to grow while stock prices stood still, effectively executing a healthy time correction.
For investors who have faithfully put money into the market over the last two years without seeing significant returns, this consolidation phase represents the ultimate accumulation zone. When the global cycle pivots and FIIs return to capture India’s robust domestic growth, the market is highly positioned to deliver a massive bonanza to patient, disciplined investors.
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Disclaimer: The views and opinions expressed in this article are those of the author and are intended solely for informational and educational purposes. The content does not constitute investment, financial, tax, legal, or professional advice. Market observations, policy interpretations, and forward-looking statements are based on current information and assumptions that may change without notice. Actual market performance and economic outcomes may differ materially from those discussed. Readers should conduct their own research and consult qualified professionals before making any investment or financial decisions. Neither the author nor the publisher accepts responsibility for any loss arising from reliance on this content.
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