Best and worst performing sectoral stock market indices in 2022

• India’s benchmark indices have touched new all-time highs in 2022 thanks to a rally in several key sectoral indices.
  
• While the charge was led by PSU bank, FMCG and metal indices, other key sectors also pitched in with substantial contributions.
  
• Overall, eight sectoral indices posted gains in 2022, while six indices registered declines.
  

India’s benchmark indices have touched new all-time highs in 2022 thanks to a rally in several key sectoral indices. Leading the charge were the PSU bank, FMCG and metal indices, with substantial contributions from several other key sectors.

Overall, eight out of the fourteen Nifty sectoral indices have gained so far this year – with their gains handsomely topping the benchmark Nifty50’s 4.4% returns this year.

PSU bank index rules

The PSU Bank index emerged as the top sectoral winner, recording gains of nearly 73% – or about 16x the gains of the Nifty50. Despite this increase, the PSU bank index’s price-to-book (PB) ratio is considerably lower at 1.2. This number has risen from 0.67 at the beginning of 2021 and 0.89 at the beginning of 2020.

PB ratio measures a company’s market capitalisation to its book value by dividing the share price by the book value per share. A value lower than up to 3 is considered good for value investments.

It’s not just the PSU banks index that has rallied in the banking universe – the Nifty Private Banks index, and the broader Nifty Bank index have both seen a surge. Both the indices are currently trading at a PB ratio of 2.9.

“Banking stocks have been going up for a few reasons – one is, the credit growth has now started picking up nicely, the net interest margins (NIMs) are improving, and asset quality, so far, has been stable as there is no deterioration. All three put together have led to re-rating of banking stocks,” Deepak Jasani, head of retail research at HDFC Securities, told Business Insider India.

Among the best performers were also the FMCG, auto, metals and oil & gas indices – all of which gained between 16-21%.

The FMCG sector benefited from softening commodity prices – for instance, the prices of palm oil, a key input, softened from highs of $1,800 per tonne to $880 now, easing the pressure on margins.

The auto sector rebounded after a slump in 2021, thanks to the resumption of travel, offices, schools and colleges. Coupled with 2022 being a disruption-free year, the auto industry witnessed an improvement in demand.

Metal stocks, on the other hand, faced multiple headwinds this year due to rising energy and input prices. However, those concerns have started to ease and analysts believe a pick up in prices should translate to margin improvements.

Lastly, the oil and gas sector gained on account of a boil in energy prices due to the Russia-Ukraine war sparking a rush to shore up oil and gas reserves.

IT, pharma indices among top losers

After an unprecedented rally in 2020 and 2021, the IT and pharma indices have emerged as the top losers in 2022 so far.

The Nifty IT index, for instance, gained 145% in total between 2020 and 2021, while the Nifty Pharma index gained 76% in the two years.

However, the trend reversed in 2022. While the IT index lost the most at almost 26%, the pharma index shed nearly 9%. According to a CareEdge report, the pharma sector lost steam as it came off the Covid boost and as supply chain disruptions resulted in a rise in the cost of active pharmaceutical ingredients (APIs), the key ingredients of a drug. The wearing off of the Covid boost also affected the healthcare sector, with the index declining over 9% this year.

Consumer durables, which was the second-biggest sectoral loser this year, struggled due to a rise in commodity prices resulting in multiple price hikes. Coupled with interest rate hikes pushing EMIs higher for customers, 2022 was a disappointing year for investors in this sector.

The realty and media sectors also lost their sheen this year as inflation and recessionary concerns spooked investor sentiment.

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