Sectors to Drive Indian Stock Market’s Next Rally: Expert Analysis
Indian equities closed September on a positive note after two consecutive months of losses. The Nifty 50 gained 0.75%, rebounding from declines of 1.4% in August and 2.9% in July. The month saw sharp swings—early optimism from GST rate cuts, the US Fed’s rate reduction, and renewed trade talks was overshadowed by concerns over Donald Trump’s steep $100,000 H-1B visa fee hike and the imposition of 100% tariffs on pharma imports.
Broader Indices and Sectoral Performance
Broader indices also ended higher, with the Nifty Midcap up 0.4% and the Nifty Smallcap surging 1.5%. Sectoral performance, however, was mixed. Banking and financial stocks gained 2.5% each, while IT slumped over 5%. Auto and metals led the rally with gains of 4% and 8.5%, respectively, whereas FMCG dropped 2%, and realty and pharma slipped 0.3% and 0.2%.
Shift in Leadership
Despite the recovery, markets have corrected more than 5% since the record high on September 27. Experts now expect leadership to shift towards sectors linked to India’s domestic growth cycle, driven by supportive policies, global trends, and rising consumer demand.
Sectors to Invest In
Analysts list sectors to invest in for the remainder of the year. Let’s take a look.
Metals and Mining
Anirudh Garg, Partner and Fund Manager at INVasset PMS, said metals and mining are set to benefit from a recovery in global commodity prices. “Global rate cuts and China aggressively stacking gold, silver, and rare earth minerals are lifting demand,” he noted. Combined with India’s capex push and infrastructure build-out, the sector is expected to enjoy strong cyclical momentum.
Healthcare and Pharmaceuticals
Both Garg and Trivesh D, COO of Tradejini, highlighted healthcare as a structural growth driver. Rising insurance penetration, hospital expansions, and an ageing population make it a defensive sector in uncertain markets. Trivesh added, “The healthcare and pharmaceutical sector appears to be strong despite tariff shocks, due to the support of domestic consumption and international generics.” With steady domestic demand and exports, pharma continues to provide stability to portfolios.
Consumption
Consumption remains a critical lever for market growth. Garg pointed out that festive and wedding season demand, GST rationalisation, and a revival in discretionary spending once rate cuts filter through could give consumer-facing firms renewed pricing power. The combination of cyclicality and policy support positions this sector as a major beneficiary of India’s next growth wave.
Renewable Energy
Renewable energy is gaining significant traction, with experts highlighting its long-term promise. Trivesh called it a “strong contender,” backed by the government’s 500 GW renewable capacity target by 2030. Mayank Jain, Market Analyst at Share.Market, noted that “in 2024 alone, investments in solar, wind, and other clean projects crossed $20 billion.” This capital inflow, supported by policy, makes green energy one of the fastest-expanding spaces.
Banking and NBFCs
Financials continue to be the backbone of India’s growth story. Trivesh highlighted retail credit and digital finance as key drivers for banks. Meanwhile, Devarsh Vakil, Head of Prime Research at HDFC Securities, maintained a positive stance on NBFCs, citing “declining global interest rates, notably in the US and India, which should enhance funding affordability and support overall credit growth.” Robust GDP growth and proactive provisioning have left NBFCs well-placed to ride the next credit cycle.
Technology and IT Services
India’s technology sector is also showing strong momentum, particularly in artificial intelligence and digital transformation. Jain observed that the sector has grown at 15–18% annually over the past three years. With global clients pushing digital adoption and Indian firms investing heavily in AI, the sector remains one of the country’s most globally competitive engines of growth.
Infrastructure
Infrastructure is another focus area, with the government planning to spend $1.5 trillion over the next five years. Investments in roads, railways, and urban development are expected to fuel 10–12% annual growth in the sector. According to Jain, this steady pipeline of projects will not only boost related industries like cement and steel but also improve productivity across the economy.
Defence
Jain also highlighted defence as a standout performer. With a record budget allocation of over ₹5 lakh crore (around $65 billion) and a 20% surge in exports, local manufacturing is gaining traction. He added that increased private sector participation and strategic partnerships have further strengthened India’s defence ecosystem, making it one of the most promising areas for sustained growth.
Emerging Sectors
Beyond the established sectors, Jain noted that new-age industries are gathering steam. Semiconductor manufacturing, fintech, and green hydrogen are attracting strong investor interest. India has targeted $60 billion in semiconductor investments by 2030, while fintech users are growing at 25% annually. Pilot projects in green hydrogen are also expanding steadily, creating future-ready opportunities.
For investors looking to capitalize on these trends, it’s essential to stay informed about the latest developments and sectoral performances. By keeping a close eye on these emerging sectors and trends, investors can make informed decisions and navigate the Indian stock market with confidence.
