zerodha top banner 2

Top 5 Sectors with the highest return: In the financial markets, there are hundreds of stocks that are trading, and the companies are engaged in different types of business. In the process of selecting the best stock one parameter to look for is the performance of the stock as compared to the sector or industry in which it is operating in.

In this article, we will look at what sectoral indices are and the top 5 sectors with the highest return in the last five years Keep reading to find out!

What are indices?

Before we look at which sectors have given the highest returns in the last five years, it is imperative to have some idea about what a sectoral index is.

Similar to indices such as the Nifty 50 which tracks the performance of the top 50 companies in India by market capitalization or the BSE Sensex which summarises the performance of the top 30 companies, there are other indices that track companies in similar sectors.

A Sectoral index provides a concise summary of the data from a specific sector or industry. This helps the investor not only analyze which sector is performing well but also compare the performance of a stock against the sector as a whole. The companies under these indices are categorized based on their common products or services. 

Top Sectors with the highest return in the last five years

Let us have a look at the top sectors with the highest return in the last five years.

5paisa Derivatives Advisory

1. Information Technology (IT)

The Indian IT sector is one of the vast sectors in India. This sector has seen a  drastic upsurge, especially in the recent past. In FY21, the IT sector alone contributed 9% to the national GDP, and also accounted for 51% of total services exports. Hence it’s safe to say that the IT sector is growing at twice the rate of the economy.

In the last five years, the IT sector has given the best returns as compared to other sectors in India. The NIFTY IT index has given a return of more than 177.89% while the BSE IT index delivered a return of 189.7%. The NIFTY IT index captures the performance of the Indian IT companies.

However, since the beginning of the year 2022, the index has been volatile. So far this year, the index is down by 8.14%. The correction can be attributed to headwinds of slowing revenue growth, reduced margins, high consensus expectations& stock valuations, in addition to a weak macro environment. 

Constituents of Nifty IT
StockWeightage (%)
Tata Consultancy Services Ltd28.78
Infosys Ltd.25.82
HCL Technologies Ltd.8.95
Wipro Ltd8.18
Tech Mahindra Ltd7.97
MphasiS Ltd.5.16
MindTree Ltd.5.02
Larsen & Toubro Infotech Ltd.4.85
Coforge Ltd.2.81
L&T Technology Services Ltd.2.47

2. Energy

The second sector which has delivered the highest return in the last five years is the energy sector in India. This sector has seen exceptional growth in the last few years despite multiple challenges and disruptions. The Indian power sector is forecasted to attract investments worth $ 128.24-135.37 Bn between FY19-23. 

India is the world’s third-largest energy-consuming country in the world. Around 80% of the country’s total demand is met by coal. To bring about more change, the companies have shifted their focus towards a more sustainable source of energy. This has led to a massive expansion in the renewable energy space led by solar power. 

NIFTY Energy sector Index includes companies belonging to Petroleum, Gas, and Power sectors. This index has delivered a return of 124.11% in the last five years. So far in 2022, the index has given a total return of 14.02%.  

Constituents of Nifty Energy
StockWeightage (%)
Reliance Industries Ltd.31.9
Adani Green Energy Ltd.12.91
Power Grid Corporation of India Ltd10.13
Adani Transmission Ltd.9.98
NTPC Ltd.9.66
Oil & Natural Gas Corporation Ltd.7.62
Tata Power Co. Ltd.5.34
Bharat Petroleum Corporation Ltd.4.51
Indian Oil Corporation Ltd.4.17
GAIL (India) Ltd.3.77

3. Metals

The metal sector in India has been among the biggest gainers in the last couple of years.  India is the 2nd largest crude steel producer in the world. In fact, India Exported 13.5 MT of Finished Steel amounting to INR one lakh crores during FY’22.

The NIFTY Metal Index is designed to reflect the behaviour and performance of the Metals sector including mining. The sector has delivered a return of 93.88% in the last five years.

And so far in 2022, the sector has declined by 6.87% and dropped by 16.23% in May alone. The recent decline could be due to hiked duty on iron ore by up to 50 per cent and some steel intermediaries by 15 per cent to step up domestic availability.

Constituents of Nifty Metal
StockWeightage (%)
Tata Steel Ltd.22.59
Hindalco Industries Ltd.15.54
JSW Steel Ltd.15.49
Adani Enterprises Ltd.14.13
Vedanta Ltd.10.04
Jindal Steel & Power Ltd4.86
NMDC Ltd.4.06
APL Apollo Tubes Ltd3.27
Steel Authority of India Ltd.3.08
National Aluminium Co. Ltd2.08

4. Financial Services

Next on the list is the Financial Services sector. It is one of the most important sectors that play a key role in the growth of the Indian economy. This sector attracts not only domestic players but also foreign players from across the globe.

To further boost this sector, multiple reforms have been introduced to liberalize, regulate and enhance the industry. Recently in the Union Budget 2022-23, the government announced plans for a central bank digital currency (CBDC) which will be known as Digital Rupee.

The Nifty Financial Services Index is designed to reflect the behaviour and performance of the Indian financial market which includes banks, financial institutions, housing finance, insurance companies, and other financial services companies. In the last 5 years, this sector has given around 72.46% returns and so far in 2022, it is up 1.76%.

Constituents of Nifty Financial Services
StocksWeightage (%)
HDFC Bank Ltd.22.04
ICICI Bank Ltd18.77
Housing Development Finance Corporation14.66
Kotak Mahindra Bank Ltd9.56
Axis Bank Ltd.6.99
State Bank of India6.92
Bajaj Finance Ltd.6.46
Bajaj Finserv Ltd.3.28
HDFC Life Insurance Company Ltd.1.97
SBI Life Insurance Company Ltd.1.77

5. Fast-moving consumer goods (FMCG) 

The FMCG sector is India’s fourth-largest sector with household and personal care accounting for 50% of FMCG sales in India. The FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220 billion by 2025

The NIFTY FMCG Index is designed to reflect the behaviour and performance of FMCGs (Fast Moving Consumer Goods) which are non-durable, mass consumption products available off the shelf. In the last five years, the index has given a 58.28% return and so far in 2022, the index is up by 1.7%.

The reason for the upsurge could be the growing awareness among consumers, faster and easier access to products and services coupled with key lifestyle changes have been the major growth drivers for the sector.

Constituents of Nifty FMCG
StocksWeightage (%)
ITC Ltd28.47
Hindustan Unilever Ltd.25.02
Nestle India Ltd8.2
Tata Consumer Products Ltd.6.68
Britannia Industries Ltd.5.24
Dabur India Ltd4.4
Godrej Consumer Products Ltd.4.01
Marico Ltd.3.65
United Spirits Ltd.3.48
Colgate Palmolive (India) Ltd2.98

In closing

In this article, we looked at the Top 5 Sectors with the highest return in the last five years. We also looked at the various indices that can be used by investors to track not only a particular stock but the sector as a whole.

The markets have been volatile since the beginning of 2022 as the bears have taken over the marketing owing to global factors such as the Russia-Ukraine war and the resurgence of covid-related cases.

However, as history suggests, the markets are likely to move up on any encouraging news. That’s all for this post. Happy Reading! What are your thoughts? Let us know in the comments below.

You can now get the latest updates in the stock market on Trade Brains News and you can even use our Trade Brains Portal for fundamental analysis of your favourite stocks.

tradebrains portal app download

Start Your Financial Learning Journey

Want to learn Stock Market and other Financial Products? Make sure to check out, FinGrad, the learning initiative by Trade Brains. Click here to Register today to Start your 3-Day FREE Trail. And do not miss out on the Introductory Offer!!