Fund managers will benchmark against it. Retail investors will compare their portfolios to it and wonder where they went wrong. They should stop wondering. In 2025, the index return and the experience of the average stock diverged sharply.
The median stock in the Nifty 500 fell 4.8% for the year. So it did not gain less than the index, it declined outright. The gap between the headline return and the typical stock stretched to nearly 12 percentage points, a chasm wide enough to swallow most portfolios.
How does an index rise 7% when its median constituent falls 5%? Concentration.
The top 50 stocks, just 10% of the index by count but over half by weight, averaged returns of 8.3%. The remaining 450 averaged a negative 1.9%.
Reliance Industries alone, with its 5%+ weight and 28.6% return, contributed more than the combined returns of hundreds of smaller companies.
Bharti Airtel’s 32% gain added another sizeable chunk. These heavyweight performances, mathematically amplified by their dominance, dragged the index upward even as most stocks drifted down.
Skewed sharpy
The histogram reveals what no single number can: markets were not particularly generous in 2025. The distribution is skewed with far more stocks in negative territory than in positive territory.
The dark vertical line marks where the index finished; the dashed line marks the median stock.
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The 12 percentage point gap between them contains the year’s essential story. Only 33% of stocks, one in three, managed to beat the index.
Just 211 stocks, 42% of the universe, posted positive returns. Meanwhile, 125 companies lost more than 20%, and 10 lost more than half.
At the extremes, L&T Finance and Hindustan Copper more than doubled, while Tejas Networks and Praj Industries fell over 60%. The market’s generosity in 2025 was remarkably selective.
This matters enormously for diversified portfolios. We simulated 10,000 random portfolios of various sizes, each drawn equally weighted from the universe. A 20-stock portfolio had just 10% probability of beating the index.
At 30 stocks, the odds drop to 5.5%. At 50 stocks, 1.6%. The median simulated portfolio returned roughly negative 1%, regardless of size. Diversification reduced volatility but couldn’t overcome the arithmetic: when most stocks underperform, most portfolios will too.
Market capitalisation carved the year into distinct experiences. Large-caps delivered a median return of positive 3.1%, with 54% posting gains. Mid-caps sat near breakeven. Small-caps bore the brunt, median decline of 10.1%, only a third finishing positive. An investor tilted toward smaller companies faced a starkly different 2025 than the headlines suggested.
What does this mean for active managers seeking alpha? The bar was simultaneously lower and higher than it appeared. Lower, because beating the median stock required only modest skill. Higher, because beating the index demanded either prescient concentration in the few winners or heavy exposure to mega-caps. Broad stock-picking faced brutal headwinds.
When someone tells you the market did well in 2025, ask: which market? The capitalisation-weighted index, or the universe of actual companies, where the typical outcome was a loss?
The implication is uncomfortable but clear. In a market where two-third of stocks trail the benchmark and random 30-stock portfolios have a 5% chance of keeping pace, the odds favour owning the benchmark itself. Stock-picking skill still exists. But in years of narrow leadership, even good stock-pickers face arithmetic working against them.
The reasonable headline index return masks the fact that 2025 was a sombre year for most stocks, which should put the potentially sub-par performance of most active portfolios into context.
Such phases of concentrated gains test patience and tempt investors to abandon well-laid plans. A disciplined asset allocation, one that accepts the index as a core holding, keeps you in the game, positioned to benefit when market leadership eventually broadens.
Anoop Vijaykumar is fund manager and head of equity at Capitalmind AMC. Views are personal
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