India’s equity market has been a tale of contrasts. The Nifty 500 slipped 2.9% over the year as foreign investors pulled back funds, rattled by global tariffs, moving capital to less expensive markets like China.
However, the last six months painted a different picture. The market bounced back, with the Nifty 500 climbing 11.5%. This turnaround was largely thanks to Indian investors who poured money into the market through regular investment plans and institutional funds. Government spending on big projects in infrastructure and defense also gave a significant boost to companies in those sectors. This recovery points to strong local investment and government policies balancing out global economic challenges.
Digging deeper, we see a divided market. Sectors like defence and electric vehicles (EVs) delivered impressive returns, while media and IT stocks struggled. According to Kotak Institutional Equities, this proves that simply having a steady flow of money into the market doesn't guarantee that it will rise. The firm advises investors to go back to basics and focus on a company's earnings and true value, rather than just relying on investment trends.
In this edition of Chart of the Week, we track the performance of sectoral and group indices over the past year. The analysis shows gains in defense, EV, and quality-focused indices, with steep declines in IT, media, utilities, and Tata Group indices.
Defence and EVs lead the charge
Two of the year's biggest success stories were the Nifty India Defence and the Nifty EV & New Age Automotive indices, which shot up by 33.1% and 25.7% respectively. The government's "Make in India" push has increased demand for locally made defense gear, benefiting companies like Hindustan Aeronautics, Bharat Electronics, and Mazagon Dock..
Similarly, the production-linked incentive (PLI) scheme has helped car manufacturers like Mahindra & Mahindra and Eicher Motors expand their electric vehicle lines. Mahindra has launched new EV models, while Eicher has rolled out electric trucks. Over the past year, Mahindra & Mahindra's stock has risen by 22.5%, and Eicher has seen a 40.8% jump, with government support and shifting consumer tastes powering India’s EV market.
Smart picks: How quality and strategy boosted gains
Aside from investing in specific themes, three other market indices delivered solid returns by focusing on smart diversification and strong company fundamentals. The Nifty500 Equal Weight, the Nifty Smallcap250 Quality 50, and the Nifty India New Age Consumption indices saw gains of 25.5%, 23.5%, and 24.4%, respectively.
The Nifty500 Equal Weight index has a simple but effective strategy: it treats all 500 companies it tracks equally, no matter their size. This approach lessens the impact of a few giant corporations, giving smaller, faster-growing companies a chance to shine.
Another standout was the Nifty Smallcap250 Quality 50 index. This index is made up of smaller companies that are profitable, have steady earnings, and low debt. This focus on quality benefited companies like eClerx Services and Manappuram Finance, which rose by 62.7% and 38.6% over the last year. The index's success is even more impressive when compared to the broader Nifty Smallcap 250 index, which actually fell 4.2% during the same period.
Finally, the Nifty India New Age Consumption index tracks how people's spending habits are changing. It includes companies in areas like real estate, digital services, and travel—the kinds of things people spend on as their incomes grow. The success of companies such as Vishal Mega Mart and Paytm shows this shift toward online shopping and premium experiences.
Together, these three indices show that there are many paths to strong returns. Instead of just chasing high-growth sectors, they suggest that spreading investments widely, picking financially healthy companies, and paying attention to consumer trends can also lead to big gains while managing risk.
The laggards: IT and media face disruption
On the flip side, the BSE IT Sector fell by 17.9%. A slowdown in the global economy led clients in the US and Europe to cut back on technology spending, which hurt major players like TCS and Infosys. The rapid rise of artificial intelligence has also created new challenges, forcing these companies to rethink their business strategies.
The Nifty Media index fared even worse, dropping 23% as it struggled to adapt to the digital age. Traditional advertising revenue from TV and newspapers is drying up as audiences move to streaming services, and movie theaters are facing tough competition from on-demand platforms. The failed merger between Zee and Sony added to the sector's problems, impacting companies like Zee Entertainment, PVR INOX, and Sun TV Network.
For both IT and media, the main problem is relying too heavily on old business models. The IT industry's outsourcing services are being challenged by AI, while traditional media is losing out to digital content. Without major changes, a quick recovery for these sectors looks unlikely.
Heavyweights underwater: Utilities, power, and Tata Group lag behind
The S&P BSE Utilities index fell 18.3% over the past year, largely due to heavy losses in Adani Group companies.
Although the Securities and Exchange Board of India (SEBI) recently dismissed the Hindenburg allegations, which caused a recent rally in Adani stocks, Adani Group shares are still down for the year. Companies like Adani Green Energy and Adani Energy Solutions have dragged down the entire utilities sector.
Similarly, the BSE Power index dropped 19% as the sector's growth slowed. Beyond the issues with Adani, other major companies also stumbled. Thermax, for example, faced problems with project execution and shrinking profits. These issues made the power sector less appealing to investors, who turned their attention to booming areas like defense and infrastructure.
The Nifty Tata Group 25% Cap index also saw a significant drop, falling 17.1%. Some of the group's biggest names, including Tata Motors, Trent and TCS, pulled the index down. Tata Motors was hit by a slowdown in its Jaguar Land Rover unit due to weaker demand and trade pressures, while TCS felt the effects of the global cutback in IT spending.
