Year 2025 has been a rollercoaster year for the Indian economy amid global headwinds. From stock market volatility and a falling rupee to tariff shocks and expanding export markets, various forces influenced India’s economic trajectory. While navigating external pressures, the government and regulators introduced key policy measures that significantly impacted retail investor sentiments. From raising income tax slabs in the Union Budget to amending national pension regulations, the focus was on improving liquidity, easing investments, and introducing safeguards—especially as foreign investors pulled out substantial capital.
Equity investments
“Foreign investors sold Rs 2.5 lakh crore amid US-related concerns, but domestic funds and local investors bought Rs 3.2 lakh crore, keeping Nifty up 12% for the year. It’s like a strong home crowd filling the stands when international guests leave early,” said Preeti Zende, SEBI Registered Investment Advisor and Founder of Apna Dhan Financial Services.
SIP inflows surged 45% to Rs 2.4 lakh crore by December 2025, AMFI data showed, with demat accounts crossing 15 crore.
To keep the retail investors' sentiment going, the markets regulator Sebi recently overhauled the 29-year-old mutual fund regulations, changing the way expense ratio is calculated leading to lower entry cost and now exit cost for investors. Under the new rules, the expense ratios have been reduced by up to 15 bps, with most asset slabs seeing a 10 bps cut.
“2025 saw a flight to safety. Investors moved into large-caps while exiting small and mid-caps, which faced steep corrections,” noted Ajay Pruthi, SEBI-registered financial planner and Founder of PLNR.
The Union Budget 2025 delivered significant tax relief to the middle class by raising the income tax exemption threshold to Rs 12 lakh. This move was expected to boost disposable income and channel fresh funds into domestic equities.
SEBI also stepped up safeguards, tightening scrutiny on IPO valuations to prevent listing-day hype. “To shield retail investors from high-risk trading losses, SEBI recalibrated equity derivative contract sizes and rationalized weekly expiry norms. This came in response to data showing 90% of retail traders were losing money in F&O,” added Pruthi.
Retirement savings boost
Beyond equities, the government also worked to strengthen traditional savings instruments. The Employees’ Provident Fund Organisation (EPFO) introduced several reforms, streamlining the early withdrawal process. Similarly, the Pension Fund Regulatory and Development Authority (PFRDA) announced major changes the National Pension System (NPS) in December 2025, focusing on flexibility -- the exit age has been raised to 85, lump-sum withdrawal limits were increased to 80% for non-government subscribers, the five-year lock-in was removed in certain cases, and annuity choices were simplified. Additionally, NPS now permits 100% equity exposure, offers multiple scheme options, and has reduced the vesting period to 15 years—a move aimed at attracting younger investors.
“The 100% equity option with a 15-year horizon is designed for a specific investor: someone early in their career, confident in the long-term growth of equities,” said Chakravarthy V, Co-founder & Executive Director of Prime Wealth Finserv Pvt. Ltd.
Insurance reform
In the winter session of parliament, the government managed to get the Insurance (Amendment) Bill allowing 100% FDI in insurance. The Bill also expanded the definition of health insurance to include sickness benefits, payment of medical expenses, personal accident insurance covering death, disablement or hospitalisation due to accidents, and travel insurance covering sickness benefits, medical expenses or losses incurred during travel.
Together, these measures reflect a year of strategic intervention—balancing market excitement with investor protection, and traditional security with modern flexibility.