After navigating significant volatility throughout the past year, the Indian stock market is showing promising signs of improvement according to the latest analysis from ICICI Prudential. The November 2025 Monthly Market Outlook report indicates that despite facing multiple challenges including foreign portfolio investor outflows, inflationary pressures, and global economic uncertainties, the market is now positioned for potential growth.
Market Performance: A Year of Contrasts
The report highlights a dramatic shift in market performance between November 2024 and November 2025. During November 2024, Indian indices delivered exceptional returns with Nifty 100 surging 31%, Nifty Midcap 150 climbing 42%, and Nifty Smallcap 250 jumping 45% in one-year returns. This represented a robust rally across all market segments.
However, by November 2025, the scenario had completely transformed. The same indices showed significantly subdued performance with both Nifty 100 and Nifty Midcap 150 delivering marginal gains of just 3%, while Nifty Smallcap 250 declined by 5% over the one-year period.
Valuation Analysis and Market Stability
ICICI Prudential's examination of valuation trends reveals interesting patterns across major indices. While valuations remain elevated, they have moderated from recent peaks. The Nifty 50 Index's median P/E ratio increased from 32.1 in October 2024 to 33.2 in October 2025, indicating relatively stable large-cap valuations.
More significant cooling occurred in midcap and smallcap segments. The BSE Midcap Index declined from its peak of 48.8 to 41.6 during the same period, while the BSE Smallcap 250 Index fell from 45.3 to 37.7, marking meaningful moderation after previous strong performance.
India's market stability stood out globally, with the India VIX remaining remarkably steady between 12.0 and 12.4 from September 2024 to October 2025. This contrasts sharply with the Global VIX, which experienced dramatic fluctuations—peaking around 48 during March 2025 before easing to approximately 20.0 by October 2025.
Earnings Recovery and Foreign Investment Trends
The report indicates a challenging period for corporate earnings in FY25, with Profit After Tax growth turning negative. PAT CAGR recorded -1% in Q1FY25 and further declined to -6% in Q2FY25, signaling corporate profitability pressures. However, ICICI Prudential anticipates a gradual recovery, projecting PAT growth improving to 4-8% through FY26 and reaching 10% in Q2FY26.
Foreign Portfolio Investors are showing renewed interest in Indian equities after a year-long pause. The data reveals significant fluctuations in FPI flows, with a sharp outflow in October 2024 followed by a renewed uptick by October 2025. This renewed interest is attributed to several factors including overcrowding in other Asian markets like Korea and Taiwan, a weaker US dollar amid rate cuts, and the short-lived impact of US tariffs.
The brokerage firm has become less cautious on equities due to evolving market conditions but cautions that elevated valuations could limit near-term upside potential. Policy measures including GST reforms, income tax reductions, and liquidity support are expected to drive the next phase of market growth, providing a foundation for sustained recovery.
