The Nifty 500 rose just 5.5% this year, reflecting uneven earnings growth, valuation concerns, and cautious foreign flows. This seemed like a slow, stagnant year for the stock market, despite strong GDP growth.

The market however, has moved sharply along selective themes. Investors favoured businesses linked to government spending, financial strength, technology, and reforms. As a result, some thematic indices saw strong gains.

Money poured into public sector banks, defence manufacturers, and metal companies building infrastructure. New-age themes like electric mobility and consumption also saw a boost.

Nikhil Khandelwal, MD of Systematix Group, said, “Indian equities are entering 2026 with market performance increasingly driven by earnings growth rather than liquidity. This makes sector selection and company fundamentals far more important than broad index exposure.”

In this edition of Chart of the Week, we break down how specific themes outperformed the broader market and why 2025 became a year where "what" you owned mattered far more than simply "being in" the market.

Financials lead 2025, thanks to structural strength

In 2025, the Nifty PSU Bank index rose over 28.3% as public sector banks strengthened their balance sheets and reduced non-performing assets (NPAs).

NPAs of PSU banks dropped sharply from over 9% in FY21 to around 2.6% by March 2025. Capital levels improved and returns steadily increased. Large banks like State Bank of India now offer good earnings visibility, while mid-sized banks are growing faster. This has built confidence across the sector.

This trend was also visible in the Financial Services 25/50 index, which rose 18% during the year. The Financial Services 25/50 index makes sure no single company dominates. No stock can be more than 25% of the index, and the top two can’t be more than 50%, so it shows the sector fairly.

Alongside lenders, financial market infrastructure companies also delivered steady gains. The Nifty Capital Markets index rose about 14.5%, mainly through rising participation. NSE trading accounts crossed 24 crore in November 2025, marking an annual increase of 20%. Individual investors accounted for about 18.8% of NSE’s total market capitalization in Q2FY26. This represents a 22-year peak in retail investor ownership.

Sudeep Shah of SBI Securities said, "This rally has been underpinned by a surge in equity market participation, record-breaking trading volumes, and a vibrant IPO pipeline." He adds, "As more retail investors joined the markets and F&O activity reached record levels, exchanges, brokers, and investment platforms earned more from transaction fees, margin loans, and other services."

PSU banks and capital market firms formed two sides of the same engine, one supplying credit to the economy, the other channeling savings into financial assets. This combination made financials a core pillar of thematic outperformance in 2025.

Defence and metals ride higher domestic demand

Another driver of returns in 2025 was India’s push toward self-reliance and domestic manufacturing. The Nifty India Defence index rose 15.7% in 2025 as defence spending moved from announcements to actual orders, backed by a record Rs 6.8 lakh crore budget.

Stock gains were led by Garden Reach Shipbuilders, MTAR Technologies and Bharat Electronics which rose 42.4%, 42% and 34.7%, respectively. Their growth was backed by a combined order book value of over Rs 75,700 crore.

The Nifty Commodities index gained 14.8% in 2025, driven by a rising cycle in global raw material prices. Unlike previous, more cyclical years, 2025 saw a steady climb as global demand for industrial inputs outpaced supply. 

The Nifty Metals index led the growth within commodities with a 26.2% surge, reaching record highs in late December. The primary driver was a global copper shortage that pushed prices to an all-time high of $12,960 per ton. 

Hindustan Copper more than doubled in value with an annual gain of 108%, while National Aluminium and Hindalco rose 48% and 43%, respectively, due to their focus on copper and aluminium for the electric vehicle transition. 

Discretionary spending jumps as consumers favour premium brands

Beyond finance and infrastructure, 2025 also marked a visible change in how Indians move and spend.

The Nifty EV & New Age Automotive index rose about 22.5% in 2025, driven by rapid charging infrastructure expansion and falling battery costs. Policy support and lower ownership expenses boosted the entire value chain, from component manufacturers to vehicle platforms.

Performance was led by Ashok Leyland in the electric commercial vehicles segment, which rose 62%, Maruti Suzuki which rose sharply within passenger cars, and TVS Motor which stood as the top gainer in the electric two-wheeler segment. Eicher Motors also rose sharply as it scaled EV operations for its first electric Royal Enfield model. 

The Nifty India New Age Consumption index gained around 17.9%, as urban spending shifted from basic staples to "aspirational" lifestyle brands.

Select turnarounds drove the rally. Nykaa jumped 65% as profits tripled in Q2FY26, helped by tighter costs and growth in its core beauty business. Telecom also staged a recovery, with Vodafone Idea rising 61% after the government converted a large part of its debt into equity, easing bankruptcy fears and enabling a fresh 5G rollout.

A Moneycontrol report noted, "Household spending on non-essentials has increased, as higher incomes drive consumers toward premium and discretionary purchases."

Together, modern mobility and new-age consumption reflected bigger structural changes in the economy. Investors backed companies aligned with these shifts, reinforcing the market’s preference for selective themes.