Over the past quarter, the Indian market has turned volatile, as both global and domestic pressures pile up. As the dollar strengthened and US elections resulted in a Trump win, foreign Institutional Investors (FIIs) were net sellers over the past quarter, with total net sales amounting to Rs 67,601 crore in equity. India’s Q2FY25 GDP growth is also expected to show a slight slowdown.
According to rating agency ICRA, the GDP growth rate is expected to dip marginally to 6.5%, compared to 6.7% in the previous quarter. However, the RBI has maintained its FY25 GDP growth forecast at 7.2%. It has adjusted the second-half estimate to 7.4%, despite a weaker first quarter and has revised the second-quarter forecast to 7% (down from 7.2%). Heavy rainfall and weaker corporate profits have contributed to this slowdown. India's retail inflation also increased to 6.2% in October, up from 5.5% in the previous month, primarily driven by higher food prices, surpassing RBI’s upper tolerance level of 6%. Madan Sabnavis, Chief Economist, Bank of Baroda described the pace of consumer price inflation as shocking. He noted, “While inflation for cereals and pulses may ease gradually, vegetables will take longer to stabilize. Core inflation also shows an upward trend, particularly in personal care products, as rising input costs are passed on to consumers.” This, he said, makes a rate cut in December unlikely.
While overall market sentiment has been negative, several sectors have outperformed the Nifty50 index in the past quarter. Key sectoral indices like IT, financial services, banking, services and realty have been resilient, delivering strong returns amid tough conditions. On the other hand, sectors such as metal, infra, auto, FMCG, energy and oil & gas have struggled, underperforming the broader market due to weaker consumer demand, as well as global uncertainty and inflationary pressure.
In this week’s Chart of the Week, we take a look at Trendlyne’s Indices Dashboard to identify the sectors that have outperformed and underperformed the flagship Nifty50 over the past quarter.
IT sector rebounds and emerges as the top-performing sector over the past quarter
The IT sectoral index Nifty IT has emerged as the best-performing sector, posting a 7.3% gain over the past quarter. Average revenue rose by 6.6% YoY in Q2FY25, driven by strong demand for emerging technologies such as Generative AI, machine learning, and cloud transformation. Tech Mahindra saw YoY net profit jump in triple digits, with a jump of 132.8%.
Its growth was fueled by positive sequential growth across all verticals, except manufacturing and healthcare. IT companies got a boost due to interest rate cuts in the US and EU. Salil Parekh, CEO of Infosys, notes, “Historically when interest rates are cut and inflation is better controlled in Western Europe and the US, spending on large technology programs tends to rise.”
The financial services and banking sector indices also outperformed Nifty50, rising 3.5% and 2.5%, respectively, over the past quarter. Banks saw higher YoY growth in deposits in Q2FY25 compared to Q1FY25, driven by increased efforts to attract deposits through higher rates and innovative schemes. Punjab National Bank, the second-largest public sector bank, recorded a 10.9% YoY growth in domestic deposits, up from 8.1% in Q1FY25.
The services sector index has risen 2.1% over the past quarter, with Zomato’s net profit increasing by 33.7% YoY for Q2FY25. The telecom services company Bharti Airtel saw a massive increase in the net profit to Rs 2,517.6 in Q2FY25 from a loss of Rs 293 crore in Q2 last year.
The Nifty Realty Index has also outperformed Nifty50, posting a return of 1.1% over the past quarter. The festive season typically sees an increase in consumer and business activity boosted by new project launches. Developers like Oberoi Realty reported strong net profit growth. It reported a profit of Rs 463.6 crore in Q2FY25, compared to a net profit of Rs 194.4 crore in the same quarter last year.
Oil & Gas, FMCG and Infrastructure are top losers over the past quarter
The Nifty Oil & Gas index has significantly underperformed Nifty50, falling 16.9% over the past quarter. This decline is primarily due to the poor performance of oil marketing companies (OMCs) such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum, which reported a substantial drop in net profit (between 70-99%) during Q2FY25. The Q2 profit came in well below expectations, as weaker oil refining margins and larger-than-expected inventory losses pushed core profit before tax (PBT) into the negative territory.
The Nifty FMCG index saw a 8.8% decline over the past quarter. Rising costs and inflation impacted FMCG companies’ topline and bottom line. To counter rising raw material costs, many companies took steps to control expenses, which slightly helped reduce the impact on their profits. ITC stood out as one of the few exceptions, posting a 15.8% increase in revenue in Q2FY25, beating its Forecaster estimate. Other companies such as Colgate-Palmolive, Britannia, Nestlé, and Dabur fell short of their revenue estimates.
The Nifty Auto index has fallen 9.4% over the past quarter. This was mainly due to the passenger vehicle segment seeing a 1.8% drop in Q2FY25 compared to the same period last year, likely due to demand saturation in urban markets and sales disruptions caused by the extended monsoon. Commercial vehicles also recorded an 11% decline in Q2FY25 compared to the previous year, which was likely driven by a slowdown in industrial and construction activity.
The Nifty Infrastructure index has declined by 6.6% over the past quarter. UltraTech Cement saw a decline of 33.9% YoY in the net profit in Q2FY25. The cement and construction company, Larsen & Toubro’s net profit also fell 26.5% in Q2. Additionally, the government has spent only Rs 3.1 lakh crore on capex by August 2024, or 27% of its annual target. This leaves a 73% shortfall, compared to 37.4% spent in the same period last year.
The Nifty Metal index has fallen by 4% over the past quarter, with 9 out of its 15 constituents, including Tata Steel, Hindustan Zinc, Hindalco Industries, Hindustan Copper, and Jindal Steel, falling during this period
