Global stock markets are racing toward record levels, but not all gains are created equal. From Wall Street to Tokyo and Frankfurt to Mumbai, each market offers a different story.
Most major global indices are now near their 52-week highs. Their one-year and quarterly performances however, show some differences. The S&P 500 and Japan’s Nikkei 225 have surged on technology and policy tailwinds, while India’s Nifty 500, despite strong economic growth, has posted the weakest one-year return among peers.
Some markets have lost steam. Hong Kong’s Hang Seng and Germany’s DAX, though strong over the past year, have flattened recently as growth momentum slowed.
The Financial Stability Board (FSB), which monitors global financial risks, recently cautioned that asset prices may be rising faster than fundamentals. FSB Chairman Andrew Bailey said, “Valuations may now be out of step with the uncertain economic and geopolitical environment, leaving markets vulnerable to sudden and disorderly corrections.”
To make sense of the divergence between markets, we look at global indices through three lenses — their one-year performance, recent quarterly momentum and current P/E ratios. This helps reveal growing, rebounding and overvalued markets. A strong one-year gain can look exciting, but if the recent quarter is flat, it might suggest a slowing rally.
Tech and policy fuel the market leaders
The United States has been the heartbeat of the global equity rally. The S&P 500 has risen 14% over the past year and another 7% in the last quarter. This is largely thanks to excitement around artificial intelligence and the outsized performance of a few mega-cap technology firms in the index. The Nasdaq 100 (US Tech 100) gained 22% annually and 10% quarterly, as investors doubled down on technology leaders.
The ‘Magnificent 7’ — Apple, Microsoft, Alphabet, Amazon, NVIDIA, Meta, and Tesla — together contributed nearly 60% of the S&P 500’s yearly advance, according to recent estimates.
Some analysts warn that valuations of big tech have run too far. Morgan Stanley CEO Ted Pick recently warned of a possible “10–15% drawdown” in global equities due to overheating valuations, suggesting investors remain alert to correction risks.
Across the Pacific, Japan’s Nikkei 225 has been equally impressive, surging 29% over the past year and 22% in the recent quarter — showing that most of its gains came just in the last few months.
The sharp quarterly rise was fueled by a record-breaking rally in technology and export-oriented stocks, with the index posting its best monthly gain in three decades in October. Investors also cheered the election of Sanae Takaichi as Japan’s new leader, which boosted hopes for fresh government spending and continued monetary support.
A weak yen added more momentum to the rally by making Japanese exports cheaper abroad, lifting profits for major names like Toyota, Sony, and chip equipment makers. With strong tech momentum, steady policy support, and foreign investors returning, Japan’s market ended the year on a high note, marking one of the world’s biggest rallies.
Taiwan has followed a similar path. The Taiwan Weighted Index climbed 19% over the past year and 16% in the last quarter, suggesting again that most of its gain came recently. The momentum is largely powered by semiconductor exports and the island’s central role in the global AI chip supply chain.
Australia’s S&P ASX 200, up 6% annually and 0.2% quarterly, sits mid-pack among global peers. Its performance reflects steady commodity exports and stable financial sector earnings. Iron ore prices have stayed firm, benefiting miners like BHP and Rio Tinto, while strong bank profits have cushioned the index against global volatility. With valuations around 20X earnings, Australian equities appear balanced — neither overheated nor undervalued.
Markets slowing after a strong year
Hong Kong and mainland China are moving at different paces. Hong Kong’s Hang Seng rose 29% over the past year and 7% in the last quarter. The rally was driven by Chinese government stimulus and a recovery in tech names like Tencent and Alibaba. However, ongoing problems in the property market have started to dampen investor confidence.
China’s Shanghai Composite, on the other hand, maintained steadier momentum — rising 16% over the year and 10% in the last quarter. The gains came as policymakers stepped up infrastructure spending and eased credit conditions to support manufacturing and industrial activity. Still, at around 11X earnings, valuations remain low, and investors are cautious about whether these measures can deliver a sustained recovery.
Germany’s DAX has also delivered strong yearly gains, bouncing back from an energy crisis. But it has been flat in the recent quarter as manufacturing growth slowed. The transition to green energy and rising business costs have also tempered investor enthusiasm. At around 17.5X P/E, the index looks fairly valued, but lacks clear short-term growth drivers.
In contrast, the UK’s FTSE 100 has been more stable. It posted solid one-year and quarterly gains, reflecting resilience across large-cap sectors such as energy, banking, and mining. With valuations around 19X earnings and proximity to its yearly high, the FTSE 100 appears to be holding its ground better than many of its European neighbors. UK’s weak GDP growth however, may limit the upside.
India’s steady, high-priced growth
The Nifty 500 has been the clear laggard among major global indices — up only 5.5% over the past year and 4.6% in the latest quarter. The recent quarterly uptick came after a weak start to 2025, helped by better-than-expected Q2 results, easing inflation, and the government’s GST cuts that boosted consumption and corporate margins.
Still, the broader one-year performance remains soft due to foreign outflows, tariff pressures, and geopolitical risks. Foreign institutional investors (FIIs) turned net sellers in 2025, pulling out nearly Rs 2.6 lakh crore YTD, even as steady SIP-led domestic inflows provided some support to the market. Meanwhile, the US raised tariffs on Indian goods to 50%, weighing on exports and overall sentiment.
Cross-border strikes after terror incidents increased risk perception and led to short-term foreign outflows, putting more strain on valuations. Moreover, India missed out on the AI-driven rally that powered developed markets, given its relatively limited exposure to high-growth tech.
At a lofty 24X PE—one of the highest in the world—valuations have capped returns. Despite this, Goldman Sachs has upgraded India from “neutral” to “overweight,” reversing its October 2024 downgrade.
Analysts believe the year-long slump in earnings forecasts has now bottomed out, as September-quarter results were stronger than expected. Goldman pointed to growth-friendly measures such as GST cuts, easy liquidity, and RBI rate reductions, adding that “India’s high valuation is now justified by robust domestic investment flows and policy support.
