Nifty 50 and Sensex, the Indian benchmark indices, have been struggling to move up over the last few months. The US increasing the import tariff on India from 25 per cent to 50 per cent last month and the strong foreign money outflows are now weighing on the Indian stock market. The Indian equity segment has seen a net outflow of $16.91 billion (year-to-date) so far this year. This is higher than the $16.5 billion outflow seen for the entire calendar year of 2022, the worst in history, as per the data available since 2002 from the National Securities Depository Ltd (NSDL).
While Nifty and Sensex are up 4.27 per cent and 2.93 per cent respectively so far this year, there are some sectors that have clearly outperformed the benchmark indices. Sectoral indices such as the BSE Auto, BSE Metal have surged over 14 and 13 per cent respectively so far this year. Indeed, there are sectors which have been beaten down badly as well. The BSE IT and BSE Realty index have tumbled about 23 per cent and 8 per cent respectively.
So, no matter how the benchmark indices perform, there will always be some sectors that can clearly be the outperformers. We have done an analysis of the sectoral indices and have come up with five sectors that can possibly outperform over the next couple of years.
Looking back
Earlier this year, in January and March, we had done a detailed sector analysis and recommended a few.
In our analysis in January, we recommended the BSE Metal and BSE Financial Services as the sectors to be considered for investment in 2025. These indices are up about 13 per cent and 8 per cent so far this year.
We have asked to sell the BSE Auto and BSE Consumer Durable indices. The BSE Auto index is up 14 per cent for this year. But before this rise happened, index tumbled 17 per cent to mark a low of 42,834 in April this year. We had expected a fall to 44,000.
Similarly, the BSE Consumer Durable index fell about 23 per cent initially and has made some recovery now. The index is down about 10 per cent for the year now. We had expected the index to fall to 53,500. The index actually fell well beyond that to a low of 49,772.
For a more details on the sectors covered and what has actually happened after that, please see the table below.
Methodology
The five sectors that we are recommending now are purely selected based on the chart reading using the Technical Analysis technique. Fundamental factors are not considered and may/may not go inline with our technical analysis.
We have picked one stock from each sector that look good on the charts. For those investors who are more risk-averse can consider the Exchange Traded Funds (ETFs) in which ever sector it is available. ETFs are available for the Industrials, PSU and India Manufacturing sectors.
The levels mentioned for each index can be used as a proxy to enter and exit the stock or the ETF.
Investors will have to necessarily do their own due diligence before investing in the stocks recommended here. Also, risk management in the form of having a stop-loss is a must as a part of the strategy at the time of entering.
BSE Industrials (14,696)
The downtrend, from a high of 16,533.21 made in July last year, found a bottom earlier this year. The index made a low of 11,380.29 in April this year and has risen very well from there. This reversal has happened from an important resistance-turned-support level of 11,400.
Short-term support is in the 14,000-13,800 region. Long-term support is at 12,400.
An inverted head and shoulder pattern is getting formed on the weekly chart. This is a bullish pattern. The neckline resistance of this pattern is around 15,360. A strong break above it will confirm this pattern. That, in turn, will boost the bullish momentum.
The BSE Industrials index can then rally to 19,500-20,000 initially and then to 22,000 eventually over the next one or two years.
The bullish view will go wrong if the index declines below 12,400. In that case, a fall to 11,000-10,850 can be seen.
What to do?
Buy the index now at 14,696. Accumulate on dips at 14,300. Keep a stop-loss at 12,200. Exit when the index touches 20,000.
Trail the stop-loss up to 16,100 when the index goes up to 17,200. Revise the stop-loss up to 17,800 and 18,900 when the index touches 18,600 and 19,400 respectively.
Stock to watch: PTC Industries
BSE Capital Goods (68,346)
The corrective fall that has been in place since July last year is giving an early sign of a trend reversal. The recent bounce from the low of 54,567, made in March this year, is happening from a strong trendline support. The 21-Week Moving Average (WMA) has turned up from just above the 100-WMA. An inverted head and shoulder bullish reversal pattern is visible on the weekly chart.
All these factors strengthen the bullish case. Supports are at 64,800 and 62,800. Immediate resistance is at 72,400 – the neckline resistance of the inverted head and shoulder pattern. A break above it can take the index up to 80,200 initially. A corrective fall thereafter to 74,000-73,000 is a possibility. A reversal again from the 74,000-73,000 range can breach the resistance at 80,200 eventually. Such a break can take the BSE Capital Goods index up to 91,000-92,000 over the next one-two years.
What to do?
Buy now at 68,346. Accumulate on dips at 66,800. Keep the stop-loss at 59,300. A target of 91,000 can be looked for.
Trail the stop-loss up to 74,200 when the index goes up to 76,300. Revise the stop-loss up to 78,800 and 84,500 when the index touches 80,300 and 87,500 respectively.
Stock to watch: Mazagon Dock Shipbuilders
BSE India Manufacturing (1,042)
The long-term trend has been up and strong since April 2020. After touching a high of 1,156 in September last year, the index witnessed a corrective fall. A long-term support around 890 halted this fall earlier this year. The index has risen back very well from a low around 875 made in April this year. This keeps the broader uptrend intact.
Important supports are at 1,030, 1,000 and 970. The BSE India Manufacturing index has potential to target 1,400 in a year or two.
The index has to decline below 970 in order to negate the above-mentioned bullish view. If that happens, a fall to 900-880 can be seen again. However, a strong negative trigger might be needed to drag the index below 970. As such, a fall below 970 might be unlikely.
What to do
Buy the index now at 1,042 and accumulate at 1,030. Keep the stop-loss at 940. Look for a target of 1,400.
Trail the stop-loss up to 1,080 when the index goes up to 1,140. Revise the stop-loss up to 1,190 and 1,280 when the index touches 1,260 and 1,340 respectively.
Stock to watch: Oil and Natural Gas Company
BSE CPSE (3,766)
The index peaked at 4,643 in August last year. From there, it tumbled about 34 per cent to make a low of 3,057 in March this year. The rise from this low indicates that the correction might have ended. It is happening from just below the 38.2-per cent Fibonacci retracement support level of 3,174. A trendline support is also poised near 3,040, which has aided in limiting the downside.
Strong supports are at 3,700 and 3,500. Resistance is around 4,050. A break above it will confirm the resumption of the long-term uptrend. It will also boost the bullish momentum. Such a break can trigger a rally to 5,350-5,400 in a year or two.
A fall below 3,500 is needed to reduce the chances of the above-mentioned rally to 5,400. In that case, the index can revisit the support level of 3,174.
What to do
Buy now at 3,766. Accumulate on dips at 3,680. Keep the stop-loss at 3,320. Look for a target of 5,400.
Trail the stop-loss up to 4,020 as soon as the index goes up to 4,350. Revise the stop-loss up to 4,280 and 4,850 when the index touches 4,650 and 5,100.
Stock to watch: NLC India
BSE PSU (19,409)
The sharp fall from the high of 23,018, made in August last year, halted at a low around 15,647 in March this year. From this low, the index has recovered very well. The 38.2-per cent Fibonacci retracement support at 15,759 has aided in halting the corrective fall in the index. That keeps the overall long-term uptrend intact.
Supports are at 18,800 and 17,800. Resistance is around 20,150. A break above this resistance can strengthen the bullish momentum. That will clear the way for a fresh rally to 24,000-24,500.
The bullish view will go wrong only if the index declines below 17,800. If that happens, the index can fall back to 15,700 levels again.
What to do
Buy now at 19,590. Accumulate on dips at 19,200. Keep the stop-loss at 17,300. Look for a target of 24,500.
Trail the stop-loss up to 21,300 when the index goes up to 22,700. Revise the stop-loss further up to 22,600 and 23,300 when the index touches 23,100 and 24,000
Stocks to watch: Steel Authority of India Ltd.
Published on September 27, 2025