One year has passed since the Indian stock markets, represented by the Sensex and Nifty, reached record highs on September 27, 2024. The Sensex touched 85,978.25, and the Nifty hit 26,277.35. Since then, the Nifty has seen a decline of around 6%, indicating a period of consolidation rather than a fundamental market downturn. As of September 30, 2025, the Sensex closed at 80370 points, a marginal increase of 0.01% from the previous session. However, it remains 4.62% lower compared to the previous year.

Factors Influencing the Market

Several factors have contributed to the market's performance over the past year. These can be broadly categorized into global and domestic influences:

• Global Economic Challenges: Rising inflation, fears of a trade war due to proposed tariff plans, and a strengthening U.S. dollar have created volatility in global markets. Geopolitical tensions, US Federal Reserve decisions, and trade disruptions continue to influence market movements.
• Foreign Investment Flows: India has witnessed significant outflows of foreign portfolio investment (FPI), with the rupee weakening against the dollar. Foreign Institutional Investors (FIIs) can significantly impact market liquidity and valuations.
• Domestic Economic Indicators: Weak corporate earnings in the third quarter of FY25, reduced consumer spending, and rising interest rates have dampened market sentiment. The Reserve Bank of India's (RBI) monetary policy and government policies also play a crucial role.
• Trade Relations: Strained trade relations between India and the US, particularly regarding tariffs, have created uncertainty, especially in export-oriented sectors like IT and pharmaceuticals.

Potential Triggers for the Next Milestone

Despite the challenges, experts suggest that the Indian stock market has the potential to reach new record highs, possibly in the latter half of FY26 or late 2026. Several factors could drive this growth:

• Macroeconomic Tailwinds: Anirudh Garg, Partner and Fund Manager at INVasset PMS, suggests that India's potential free trade agreement with the UK, stronger energy and trade ties with Russia and China, and Brent crude prices trading below $70 could act as key drivers. A potential 50-basis-point RBI rate cut, coinciding with the Federal Reserve's easing cycle, could also boost the market.
• Domestic Consumption: Festive and wedding demand, potential Goods and Services Tax (GST) rationalization, and targeted tax relief could further stimulate consumption. Strong domestic consumption has supported company revenues.
• Government Initiatives: Initiatives like "Make in India" and infrastructure development continue to attract long-term investments. Policy support from the government and the possibility of interest rate cuts could provide upward momentum.
• Earnings Growth: Earnings are expected to pick up towards the end of 2025 and in the first quarter of 2026. Increased consumption should positively impact earnings, particularly in sectors that directly benefit from increased volumes, sales, and margin improvements.

Challenges and Risks

While the outlook appears promising, several risks and challenges remain:

• Geopolitical Tensions: Geopolitical tensions and policy risks continue to pose challenges.
• India-US Relations: Strained India-US relations and uncertainties surrounding tariffs could create near-term headwinds.
• Global Economic Uncertainty: Continued global economic uncertainty and volatility could impact investor sentiment and market performance.

Conclusion

The Indian stock market has been in a period of consolidation since hitting record highs in September 2024. While global and domestic challenges have weighed on the market, several factors could potentially drive it to new milestones in the coming years. These include macroeconomic tailwinds, strong domestic consumption, government initiatives, and improved corporate earnings. However, investors need to remain cautious and monitor geopolitical risks, trade tensions, and global economic developments. The timing of the next record high will depend on how these multiple factors align.