India’s equity market is undergoing a subtle but critical sectoral shift as the latest Relative Rotation Graphs (RRG) from Share.Market reveal evolving momentum patterns among key industries. While the banking sector continues to lead, its waning strength suggests the tide may be turning in favor of sectors like IT and metals.
According to Share.Market’s weekly Sector Rotation Report, which analyses sectoral movements relative to the Nifty 50 benchmark over a six-week period from April 4 to May 16, several sectors are showing signs of transition.
Banking: Leading but Losing Momentum
Banking, private banking, and financial services indices have remained in the leading quadrant, outperforming the broader market with strong relative strength and momentum. However, recent trends show a decline in both, signaling that this leadership may not last much longer. Analysts suggest that while fundamentals remain solid, valuations and macro headwinds could be prompting investors to rotate out of these heavyweights.
IT and Metals: From Laggards to Contenders
The IT sector, which had been underperforming, is now showing renewed strength. Rising momentum and improving relative performance indicate growing investor confidence, possibly driven by global tech demand and cost optimization initiatives.
Metal stocks, while still in the lagging quadrant, have shown a modest improvement in momentum. While early, this may signal the beginning of a bottoming-out phase, especially if global commodity cycles turn supportive.
Auto and Pharma: Mixed Signals
The auto sector remains in the lagging zone but is witnessing a gradual pickup in momentum. Analysts interpret this as early signs of a cyclical rebound, though visibility remains low. In contrast, the pharma sector has slipped deeper into underperformance, moving from weakening to lagging with falling momentum and strength—indicating structural pressures may persist.
FMCG and Healthcare: Struggling for Direction
Once seen as safe havens, FMCG and healthcare sectors have also drifted into the lagging quadrant. Share.Market notes that these sectors have failed to sustain prior momentum, likely reflecting stretched valuations and tepid earnings growth.
What Lies Ahead
As of mid-May, the sectoral rotation paints a picture of a market in transition. “Investors should watch out for emerging leadership from beaten-down sectors showing signs of revival. The IT and metal sectors deserve close attention, especially if momentum sustains,” the report said.
The Relative Rotation Graph (RRG) framework used in the analysis is particularly helpful in identifying turning points, enabling investors to shift focus ahead of major sector rallies. Experts suggest that success in the current environment will depend on adaptability and timely sector rotation.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
