FY25 hits & misses: Media, PSU bank shares slip in double digits while defence, financial services shine

Media will likely end up as the worst performing sector in FY25, followed by energy, PSU banks and realty, each falling in double digits while defence, financial services and healthcare could end up as the winners with gains in two digits.

Nifty Media has fallen by 20% on the financial year-to-date basis, while Nifty Energy, Nifty PSU Bank, Nifty Oil & Gas and Nifty Realty have fallen by 19%, 18%, 12% and 12%, respectively in the said period. Others including Nifty PSE, Nifty Infrastructure, Nifty FMCG, Nifty Commodities, Nifty Auto, Nifty Housing and Nifty MNC declined between 5% and 2%.


On the other hand, defence, financial services and healthcare have not just outperformed Nifty with returns of 22%, 12% and 10%, respectively, they are also chart toppers.

Other Nifty outperformers are Nifty India Consumption (2.06) Nifty India Digital, Nifty Bank, Nifty Private Bank, Nifty IT, Nifty Services Sector, Nifty Metal, Nifty Consumer Durables and Nifty Pharma which have gained between 2% and 9%.


Also Read: Over half of NSE's Rs 1,000 cr+ m-cap stocks drop in FY25. 10 smallcaps hit hardest

In this period, the headline Nifty index has gained by 0.81% while conceding most of its gains since October after recording a lifetime high of 26,277.35.

What’s brewing

While some sectors were able to brave the weak market sentiments that have prevailed in the past six months, others could not. Their fall could be a combination of unfavourable sentiments, and sector and company specific issues.

Media, for example, has suffered weak earnings in 9MFY25, witnessing an 8% decline in profit after tax (PAT), Motilal Oswal Financial Services' (MOFSL) review note revealed. Similarly, stocks in the Oil & Gas sector under MOFSL’s coverage universe reported a 33% fall in their 9M earnings.

Stocks of PSU Banks have fallen despite reporting strong numbers. Against Nifty50’s modest 4% PAT growth in 9MFY25, the net profit of public lenders have surged by 23% in the same period, MOFSL said.

"In the banking space, PSU banks have been significantly beaten as compared to the private sector banks, with the Nifty PSU Bank index down by almost 9% YTD against 1% correction in the Nifty Private Bank Index. Overall, investor sentiments appear to be more favourable towards the large-cap private sector banking names as opposed to PSU banks with the exception of SBI," Aamar Deo Singh, Senior Vice President-Equity, Commodity & Currency at Angel One told ETMarkets.

He attributed the ongoing phenomenon to overall declining growth trends in PSU bank stocks along with concerns regarding NPAs, future credit growth and rising competition with private sector banks. Singh said that these factors are collectively making the current environment for PSU banks challenging and forcing investors to rethink about investing in them. "Going forward, one needs to be selective in this category," he warned.

Also Read: PSU bank stocks crack up to 34% in the past one year. Is it time to exit?

PSU/PSE and infrastructure stocks have softened following a great run for the past many years as investors booked profits on valuation concerns and lack of similar promise (they enjoyed before) owing to flat government capex allocation in this year's budget.

The 3-year returns by the BSE PSU index is still 99%, despite an 18% erosion in the past 6 months. Likewise, Nifty Infra index's 3-year returns are recorded at 63% while it has seen a 14% slip over the past six months.

Notwithstanding a 30% fall over the past 6 months, Nifty India Defence has been the top performer in the pack. Defence stocks have had a stellar run in the last couple of years amid the government’s strong focus on the sector. That had kept the stocks going until they hit the valuation wall.

While financial services stocks are second best in terms of gains, they have fallen less (-1.5%) compared to many of their peers in the past six months.

Healthcare has been among the top performing sectors and has seen major earnings upgrades. The 9MFY25 PAT growth registered by the sector is 23%.

Pockets of opportunities

MOFSL has a positive view on metals, NBFCs, private banks and technology and expects them to lead the incremental profits for FY26E.

For Nilesh Shah, banking and financial services is one sector where one can look to add during this correction. The valuations are now trading way below historical average for many of the private banks after the FPI selling, he said. Moreover, the NPA cycle is under control and with the RBI improving liquidity, it will push up deposit as well as credit growth, the MD of Kotak AMC said. The second space where he is bullish is consumer discretionary space.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)