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A study done by Alchemy Capital shows that sectoral leaders change in every market cycle. The study captures 20-year sectoral trends of Indian market capitalisation.
The sectors include financials, cyclicals (materials, industrials, energy, utilities, communications and real estate), consumer and other defensive (IT & healthcare).
These changes in sectoral leadership can be divided into three phases: December 2003 to December 2007, December 2007 to December 2019 and December 2019 to March 2024. Let us look at the sectoral leadership during each of these phases:
December 2003 to December 2007
The period from December 2003 to December 2007 was dominated by cyclical sectors. These sectors increased their proportion in India's market cap from 40.7% in December 2003 to 66.6% in December 2007.
Among these sectors, the proportion of materials increased from 13.7% to 15.2% while industrials increased their proportion from 8.6% to 11.8%. Energy sector saw good growth during this period and increased its proportion in India's market cap from 11.8% to 17.6%. The Utilities sector increased their proportion from 3.5% to 7.2%. Communications also saw an increase in its sector weight from 3.1% to 8.9%. Real estate increased its share from 0 to 5.9%.
The financial sector, meanwhile, saw a decrease in its proportion in market cap from 19.4% to 15.3%. The consumer sector saw a significant decrease in its share in India's market cap from 19.6% to 7.7%. The IT & healthcare sector also saw a decline in its share in India's market cap from 20.3% to 10.5%.
December 2007 to December 2019
This period saw the financial sector leading the way while cyclical sectors lost their dominance. The consumer sector and IT & healthcare also grew during this period.
The proportion of the financial sector in the Indian market cap increased from 15.3% to 37.5%. The cyclical sectors, on the other end, saw their share in the market cap reduce from 66.6% to 30.9%.
Among cyclicals, the share of materials reduced from 15.2% to 10%, industrials from 11.8% to 6.2%, energy from 17.6% to 8.7%, utilities from 7.2% to 3.1%, communications from 8.9% to 2.4% and real estate from 5.9% to 0.6%.
The consumer sector, meanwhile, increased its share from 7.7% to 17.5%. IT & healthcare also increased their share from 10.5% to 14.1%.
December 2019 to March 2024
This period saw a change in the leadership of sectors after COVID-19. While the financial sector had a great run from December 2007 to December 2019, their proportion in the Indian market cap saw a decrease from 37.5% to 27.8% in the post-COVID period.
The cyclical sectors saw an upward trend as their share in India's market cap increased from 30.9% to 38.4%. Many cyclical sectors saw high growth in this period: industrials from 6.2% to 11.8%, utilities from 3.1% to 4.6%, real estate sector from 0.6% to 1.4%.
IT and healthcare also increased their share marginally from 14.1% to 15%.
