Market trends in India in 2025

Key Takeaways

• Government and regulators are supporting markets through digital transformation and streamlined settlement cycles.
• Passive investment on the rise, and IPOs increasingly popular with international investors.
• Technology is key for broker firms operating in this dynamic and innovative space.

The Indian capital markets are experiencing significant transformations in 2025, driven by government initiatives, technological advancements, and the development of new investment products. This blog looks at some of the key trends shaping the landscape.

Government and regulatory initiatives

The Indian government and regulatory bodies have proactively fostered a conducive environment for capital market growth. One standout initiative is the India Stack, a unique digital architecture that has revolutionized how millions of Indian nationals invest in shares. By providing digital IDs (Aadhaar), and widening access to banking and digital wallets, the India Stack has democratized investment opportunities.

A crucial component of this technological stack is the Unified Payment Interface (UPI). This interoperable system allows for fast, cheap, and seamless transfer of payment orders between individuals, companies, and government institutions. The impact of these initiatives is evident in the continuing growth of demat accounts. In 2024, the number of demat accounts grew to over 185 million, a 33 percent increase on the previous year.

Government policy has boosted the growth of Exchange Traded Funds (ETFs), principally their use as a disinvestment vehicle for formerly state-owned enterprises. The regulatory environment, spearheaded by the Securities and Exchange Board of India (SEBI), has further supported ETF growth. Measures to reduce transaction costs, simplify the process for launching new ETFs, and promote investor education have all contributed to the rising popularity of ETFs.

The other key regulatory development has been the rollout of same-day settlement (T+0). The latest milestone is the announcement by SEBI that optional T+0 settlement will be available for the top 500 stocks by market cap starting January 2025. Progress towards same-day settlement remains gradual, but the potential benefits (namely, improved capital utilization and enhanced liquidity) mean that further developments are highly likely.

Other trends

Passive investing is on the rise, with assets under the management of ETFs growing to more than INR 6.3 trillion (USD 75.3 billion) from INR 351 million (USD 42.15 million) a decade ago. ETFs are attractive to retail investors who value their diversified exposure to various sectors and lower costs than active funds. Regulatory developments, such as SEBI’s reclassification of mutual fund schemes and plans to exclude equity-oriented passive funds from the 25% investment cap in group companies, have further fueled this growth.

International private equity and venture capital investors are increasingly backing Indian IPOs. An EY report highlighted that nearly 41% of global IPO proceeds in the first half of 2024 came from private equity- and venture capital-backed firms, with India being a key region for such deals. The government continues to encourage foreign portfolio investment (FPI), exemplified by its support for the International Financial Services Center (IFSC) in GIFT City.

Impact on the sell-side

The continuing growth in traded volumes in the Indian capital market necessitates robust, automated trading systems for brokers. As passive products with lower expense ratios gain popularity, sell-side firms must rely on automation to cut operational costs and remain competitive. Brokers must be agile and responsive to asset managers’ needs, providing access to various trading platforms and state-of-the-art tools, such as algorithms, while ensuring regulatory compliance.

Shorter settlement cycles mean that, to maximize returns, all players involved in the trade lifecycle must have streamlined and integrated internal processes. Legacy systems are no longer sufficient to handle higher volumes and instant execution. End-to-end automation reduces human error and the risk of trade fails, making it essential to manage cross-border risk and compliance as the settlement gap between India and other jurisdictions grows.

Technological advancements, supportive regulatory frameworks, and a shift towards passive investing will characterize the Indian capital markets in 2025. These trends create a dynamic and inclusive market environment, positioning India as a key player in the global financial landscape.