The Indian equity market has seen significant shifts over the past year. Drawing on the keen observations of our Quant team, Aniruddha and Jyoti, this article highlights sectoral performances.

Sectors that set the pace in Indian equities over the last 12 months.

The Nifty 50 index is a broad spectrum of sectors, including Financial Services, IT, FMCG, Healthcare, Automobile, etc. While the index has climbed 30% in a year, each sector’s contribution varies, influenced by its individual returns and weight in the index. As an investor, identifying the sectors with the potential for higher returns could give you an edge in making more informed investment decisions.
The BSE offers indices for major sectors that constitute an index. In this study, we have analysed the performance of BSE sectoral indices over a year to see how they stack up against one another.

Analysing sectoral performance

Utilities at the top
To understand the Indian equity sectoral performance, between August 2023 and July 2024, and the returns it has offered its investors, let us consider how much an INR 1,000 investment would have fared across key sectors. According to the tracker[1], the Utilities sector emerged as the top performer over the last 12 months, achieving an impressive growth of 94.17%, much higher than the 30% exhibited by the broader index. This sector consists of major stocks such as NTPC (National Thermal Power Corporation) Ltd., Power Grid Corporation of India, Tata Power, GAIL (Gas Authority of India Limited), NHPC (National Hydroelectric Power Corporation), Reliance Power Ltd., SJVN Ltd., NLC India Ltd. and Adani Energy Solutions Ltd., with most of these companies operating within the public domain.

Industrials show robust performance 
Hot on the heels of Utilities, in terms of the returns offered, is the Industrials sector, which generated returns of ~70% over the last 1-year period. Empowered by the supportive policies of the Government, including Make in India and Aatmanirbhar Bharat, the Industrials sector – featuring major players such as L&T, Hindustan Aeronautics (HAL), Siemens, ABB, Data Patterns, Thermax and KEI[2] – have demonstrated remarkable resilience and growth.

Telecom remains in play
Not far behind, the Telecommunications sector registered a robust return of ~67% between August 2023 and July 2024. India’s telecom industry is the second largest in the world, with a subscriber base of 1.079 billion as of December 2023, covering both wireless and wireline users. The nation’s overall tele-density is 85.23%, with rural areas recording a tele-density of 58.56% and urban areas reaching 133.76%[3]. The industry encompasses various sub-sectors, including infrastructure, equipment, white space spectrum, Mobile Virtual Network Operators (MVNOs), 5G, telephone service providers, and broadband and comprises sectoral heavyweights such as Bharti Airtel, Indus Towers, Vodafone Idea, Tata Communications and ITI.

The middle rankers
Following the strong performance of Utilities, Industrials, and Telecom sectors, the tracker depicts Energy, Consumer Discretionary, Healthcare and Commodities making up the middle rank, with returns of 55.5%, 48%, 39.2%, and 34.3%, respectively. The IT sector, a segment which offered extraordinary returns to investors in the initial stages, came in towards the bottom of the ranks, with 31.8% returns over the year. However, the sector witnessed significant growth in the last two months, leading all sectors with returns of 11.30% in June 2024 and 12.87% in July 2024, highlighting its resilience, particularly in the post-COVID era.

The laggards – Finance and FMCG
Despite the overall market growth, the Finance and FMCG sectors registered the least growth over the last 12 months, with an increase of only around 18%. An INR 1,000 investment in the Finance sector in August 2023 would have grown to INR 1,185, while the FMCG sector would have taken it to INR 1,154. The FMCG sector, often considered a defensive play, tends to perform well in bear markets – its underwhelming performance amid a bullish trend comes as no surprise.

Overall, Indian equities have depicted robust performance in the past 12 months, and we will continue to monitor sector-specific performance to identify timely investment opportunities.

[1] https://www.youtube.com/watch?v=qKvIzJvSUHk
[2] https://economictimes.indiatimes.com/markets/stocks/news/if-pm-narendra-modi-wins-election-buy-these-7-industrial-stocks-jefferies/articleshow/110689383.cms?from=mdr
[3] https://groww.in/blog/best-telecom-stocks-in-india

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