Market recap 2025: Three top performing sectors of 2025

As 2025 comes to an end, investors and market participants want to delve into the performance of different sectors and industries in the last year. The NIFTY50 performed steadily with 6% gains to date in one year, underperforming major global peers. While broader markets have underperformed heavily, with NIFTY Midcap 150 and Smallcap 250 delivering 1.4% and -10.7% returns in the same period. However, there is a silver lining to this trend as the majority of the sectoral indices in NIFTY are closing the year in green.

NIFTY PSU Bank (YTD return: 24%)

The public sector banks remained in trend throughout the year with key PSU bank’s like Canara Bank, Bank of Baroda, Indian Bank, Bank of India were top performers in the index. At the fundamental level, the PSU Bank posted strong earnings growth throughout year with cleaner balance sheets.

PSU Banks which earlier grappled with bad loans are now top picks among investors for improved asset quality, strong earnings growth and improved efficiency. Additionally, the buzz around increased FDI investment limit in the PSU banks have kept the investor interest high around the PSU Bank. Additionally, PSU Bank’s were among the top picks for value investors with a high return ratios at affordable valuations.

NIFTY Financial Services ex-bank (YTD return:17%)

The non-banking financial services companies were the second best performer at the index level. However, stocks in the index have posted high double digit returns. The sector, particularly, NBFCs went through structural changes as RBI eased regulations on lending to the small and medium enterprises space, opening door for untapped lending opportunities.

Additionally, lower rate cut scenario boosted margins, owing to improved funding costs. The credit growth in the NBFC space outperformed the banking sector significantly, aiding better earnings growth and margins.The index also included fintech, AMC, Broking and exchange names like Paytm, BSE, MCX, HDFC AMC, who posted strong returns in 2025.

Among the NIFTY Financial Services (ex-bank), L&T Finance, Muthoot Finance, Aditya Birla Capital, Max Financial Services, Max Financial Services, were some of the key outperformers in the index.

NIFTY Auto (YTD return: 15%)

After the two finance sector names, the auto sector grabbed the third spot with 15.6% returns in 2025. The sector witnessed landmark reforms of reduction in GST rates for majority of its category boosting the demand for vehicles. Cars with sub-four meter displacement saw GST rate cut to 18% from 28% earlier, while higher end cars saw increase in GST rates, with omission of cess, effectively reducing the tax rate to 40% from 50% earlier. Similarly, for two-wheelers, the GST rates were reduced to 12% for bikes below 350 cc engine displacement. Additionally, tax cuts, lower interest rates also boosted the consumption demand.

Apart from the above top three performing sectors, other sectors like, Private Bank, Metals, Capital Market Index, India Defence also performed as well with 10-15% returns in the same period.