What are the best-performing sectors in the current markets?

The Indian stock market has broken several records in recent years, bouncing back from the corrections it saw after the Covid-19 pandemic’s outbreak.   

But look beyond those headline numbers and there are some interesting trends that emerge. Data shows that the realty sector has performed the best over the past five years. The Nifty Realty has delivered returns of 302%, followed by metals at 286% and auto at 256%. All of them have beaten the Nifty 50 benchmark’s returns of 127% in the period. In fact, nine of 14 sectors have outperformed the Nifty 50.

Other sectoral indices like infrastructure, energy, pharma, PSU banks, IT and MNC have also managed to beat the Nifty 50. Sectors that haven’t outperformed the benchmark include FMCG, services, financial services, bank and media.

Among the sectors, G. Chokkalingam, Founder and MD of Equinomics Research, is bullish on the infrastructure sector because of the growth seen in the Indian economy and government’s focus on this sector. Telecom and FMCG are the other sectors that he is betting on, the latter due to the good monsoon this year that is expected to boost consumption. He is critical of the valuations in the real estate that could affect affordability in this sector.

Meanwhile, Gaurav Dua, SVP, Head of Capital Market Strategy at Sharekhan by BNP Paribas, is positive on IT services, pharma and select stocks in the consumer staples space. For IT services he feels that rate cuts in the US could give this sector a push, and consumer staples is likely to perform well in the upcoming festive season.

Gaurang Shah, Senior VP at Geojit Financial Services, feels the real estate, auto and banking sectors are likely to do well. He credits that to the reforms undertaken by the government in the real estate sector. The auto sector, he feels, will do well in the festive season. He said the banking sector is likely to witness a boost after the dip it saw due to mergers.

Seen over a three-year period, the top three sectors are PSU banks, auto and realty with returns of 183%, 152% and 147%, respectively. The Nifty 50 delivered 44% returns over the period. 

The realty, auto and energy sector indices have also done well over the past year. They have delivered returns of 74% and 58%, respectively, followed by for the Nifty Energy at 53%. Other sectoral indices that have beaten the Nifty 50’s returns of 26% include pharma, infrastructure, PSU banks, MNC, metal and IT.