New Delhi [India], February 22 : The consumption and financial services stocks leading in inclusions in Nifty 50 index over the last seven years, while industrial & capex and defensive sector stocks were the most excluded, highlights a report by ICICI Securities.
The report stated that from March 2018 to March 2025, the sectoral distribution of stock exclusions and inclusions in the Nifty 50 index has shown significant shifts.
The report said "Since 2018, new-age stocks related to areas such as insurance, fintech, organised retail along with consumer and healthcare companies have enteredNIFTY50 at the cost of old economy stocks from sectors such as oil & gas, industrials and traditional lenders"
The report added that industrials and capex stocks accounted for 47 per cent of the exclusions, followed by defensive sectors at 29 per cent, consumption at 12 per cent, financial services at 6 per cent, and private banks at 6 per cent.
On the other hand, the inclusions were led by consumption stocks at 35 per cent, financial services at 29 per cent, industrials and capex at 24 per cent, and pharma at 12 per cent.
The index changes reflect a shift towards new-age stocks in areas such as insurance, fintech, organized retail, consumer businesses, and healthcare. These inclusions have come at the expense of older economy stocks, particularly those in oil & gas, industrials, and traditional lending.
This transition highlights the market's preference for high-growth sectors that align with evolving economic trends and technological advancements.
One of the most striking aspects of this shift is the divergence in the price-to-earnings (P/E) ratio of incoming and outgoing stocks.
The report noted that the median P/E ratio of newly included stocks stood at approximately 60x, while that of excluded stocks was significantly lower at around 10x. This level of divergence is much higher than normal, indicating a strong market preference for growth-oriented stocks over value-based traditional businesses.
This suggested that the current index composition is trading at a premium, reflecting investors' confidence in future earnings potential.
The evolving composition of the Nifty 50 suggests a broader market preference for high-growth sectors over traditional industries.
The shift towards consumption, financial services, and healthcare stocks indicates that investors are prioritizing sectors with strong future potential, even at higher valuations.
Meanwhile, industrial and defensive stocks have lost ground, reflecting changing economic and market dynamics.
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