As 2024 draws to a close, it’s evident that this year has been nothing short of extraordinary for Indian investors. The Indian stock market’s impressive bull run is set to culminate in a historic milestone: nine consecutive years of positive returns for Indian markets. While we celebrate these achievements, it’s also time to shift focus toward the opportunities and challenges that 2025 holds.
Which sectors will lead the next wave of outperformance? While the Nifty50 remains the go-to benchmark for traders and investors, delving deeper into the sectors underlying this broader index could make all the difference in the coming year.
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Rather than chasing individual stocks, the spotlight turns to identifying sectors poised for sustained growth in 2025.
Technical analysis beyond short-term trading
Technical analysis is often dismissed as a tool for short-term traders, but this is a misconception. When applied strategically, it can offer valuable insights for long-term trend forecasting. One powerful method in this realm is Ratio Analysis.
Understanding ratio charts
At its core, a ratio chart is a visual tool that compares the relative performance of two assets. It displays how one asset, whether it’s a stock, sector, or index, is performing in relation to another. For instance, a NiftyIT/Nifty50 ratio chart reveals how the IT sector is performing relative to the broader market.
The formula is simple: Ratio = Price of Index A / Price of Index B
The trends in these charts offer three key insights:
Rising Ratio Line: Index A outperforms Index B.
Falling Ratio Line: Index A underperforms Index B.
Flat Ratio Line: Performance between the two is similar.
By tracking these trends, investors can pinpoint sectors and stocks showing relative strength or weakness.
Multi-timeframe ratio analysis: A holistic approach
While individual timeframe analysis provides useful insights, Multi-Timeframe Ratio Analysis offers a more comprehensive approach to identifying long-term trends.
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By examining ratios across multiple timeframes—yearly, quarterly, monthly, and weekly—investors can gain a clearer picture of the consistency and strength of a sector’s outperformance relative to a benchmark index.
For example, using a custom scanner in RZone, we analysed the NiftyIT/Nifty50 ratio across these timeframes. Each timeframe earns points for sectors that outperform the Nifty50, with greater weight given to longer timeframes like yearly and quarterly charts, which establish primary trends.
Short-term traders may find weekly charts useful, but longer-term trends hold greater significance for sustained growth predictions.
Five sectors set to shine in 2025
As we prepare for 2025, Ratio Analysis highlights key sectors with the potential to outperform the broader market. Based on our Multi-Timeframe Ratio Analysis, here are the top five sectors that are likely to outperform:
The road ahead
With 2025 on the horizon, fresh opportunities abound for savvy investors. The momentum from 2024 is undeniable, and advanced tools like Ratio Analysis and Multi-Timeframe Analysis provide a clear edge in identifying winning sectors.
For more such analysis, read Profit Pulse.
Here’s to a prosperous 2025, where the trends identified today pave the way for tomorrow’s success. Let the celebrations—and the journey—begin!
Note: This article aims to share interesting charts, data points, and thought-provoking opinions. It is not intended as investment advice. If you are considering making an investment, please consult your financial advisor. The content is strictly for educational purposes.
About the author: Brijesh Bhatia brings over 18 years of experience in India’s financial markets as a trader and technical analyst. He has worked with esteemed organizations such as UTI, Asit C. Mehta, and Edelweiss Securities. Currently, he serves as an analyst at Definedge.
Disclosure: The writer and their dependents do not hold the stocks discussed in this article. However, clients of Definedge may or may not own these securities.
