Resilient Industries in the Indian Stock Market Amid 2025 Volatility
Introduction
As India’s stock market navigates heightened volatility in 2025, driven by global macroeconomic uncertainties, U.S. market corrections, and domestic retail investor dynamics, select sectors have demonstrated resilience.
Despite the Nifty 50 and Sensex facing corrections of 10–15% year-to-date, industries such as defense, private banking, pharmaceuticals, infrastructure, and building materials have bucked the trend, supported by structural tailwinds, government policy support, and domestic demand insulation.
Below, we analyze these sectors in detail, supported by earnings trends, policy catalysts, and expert insights.
Defense: Strategic Indigenization and Order Surges
Growth Drivers and Key Players
India’s defense sector is experiencing a multi-year boom, fueled by a ₹5.94 lakh crore ($71.5 billion) defense budget for 2025—a 12% YoY increase—with 75% earmarked for domestic procurement. Government initiatives like the Defense Production and Export Promotion Policy (DPEPP) and partnerships with global OEMs are accelerating indigenization.
Hindustan Aeronautics Ltd (HAL)
Dominates aerospace with a ₹1.2 lakh crore order backlog, driven by contracts for Tejas Mk-1A fighters and Dhruv helicopters. Analysts project 18% revenue CAGR through 2027, supported by exports to Southeast Asia and Africa.
Bharat Electronics Ltd (BEL)
A leader in defense electronics, BEL’s order book exceeds ₹70,000 crore, with growth in radar systems and naval electronics. Phillip Capital forecasts a 20% EBITDA CAGR, citing R&D investments in AI-driven surveillance systems.
Data Patterns
Specializes in avionics and missile systems, benefiting from India’s push to replace imports. Revenue grew 34% YoY in Q3 2025, with margins expanding to 28% due to vertical integration.
Structural Advantages
The sector’s insulation from global volatility, coupled with defense exports doubling to $3.1 billion in 2024, makes it a hedge against market downturns.
Brokerages like Elara Capital recommend overweight positions in defense stocks, projecting 25–30% upside for top picks.
Private Banking and Financial Services: Stability Amid Rate Cuts
Earnings Resilience and Valuation Comfort
Despite systemic risks from rising NPAs in PSU banks, private lenders like HDFC Bank, ICICI Bank, and Bajaj Finance have outperformed, leveraging robust deposit growth and digital adoption.
Bajaj Finance
Delivered 23% YoY profit growth in Q3 2025, with assets under management (AUM) rising 29% to ₹3.2 lakh crore. Its stock gained 20% YTD, defying the broader financial sector’s 7% decline.
HDFC Bank
Trading at 2.7x P/BV (below 5-year average), the bank’s focus on rural penetration and SME lending positions it for 15% loan book CAGR. Analysts cite improving asset quality (GNPA at 1.2%) as a key differentiator.
Catalysts Ahead
Anticipated RBI rate cuts in Q2 2025 (50–75 bps) and a revival in credit demand (12% YoY growth expected) enhance the sector’s appeal.
Siddharth Vora of Prabhudas Lilladher highlights private banks as “low-volatility havens” with 18–22% ROEs, attracting institutional inflows.
Pharmaceuticals and Healthcare: Defensive Demand and Export Momentum
Domestic and Global Tailwinds
Pharma stocks surged 14% YTD, driven by rising healthcare spending (6.2% of GDP in 2025) and U.S. generic drug shortages. The sector benefits from a weaker rupee (INR 83.2/USD), boosting export margins.
Sun Pharma
Reported 19% YoY U.S. revenue growth in Q3, led by specialty drugs like Ilumya. Domestic formulations grew 11%, outperforming the market’s 8% growth.
Dr. Reddy’s
Gained FDA approvals for 7 ANDAs in 2025, with a ₹2,000 crore R&D pipeline focused on biosimilars. Export revenue rose 22% YoY, contributing 58% of total sales.
Policy Support
The National Health Policy 2025’s emphasis on API self-reliance and production-linked incentives (PLI) for bulk drugs further bolsters growth.
Geojit forecasts 15–20% earnings CAGR for large-cap pharma firms through 2027.
Infrastructure and Capital Goods: Capex Revival and Government Spending
Order Inflows and Execution Visibility
The infrastructure sector is rebounding after a muted 2024, with central government capex rising 28% to ₹11.1 lakh crore in 2025. Key segments include power transmission, renewables, and railways.
Larsen & Toubro (L&T)
Secured ₹32,000 crore orders in Q3 2025, including a ₹12,000 crore metro project. International orders (42% of total) from the Middle East and Europe drive diversification.
Power Grid Corporation
Despite recent corrections, analysts highlight its ₹1.1 lakh crore pipeline in green energy corridors and smart grid projects. Revenue CAGR of 12% is expected through 2027.
Renewable Energy Push
India’s renewable capacity is set to rise from 125 GW to 300 GW by 2030, with solar module PLI schemes attracting ₹24,000 crore investments. Companies like Tata Power and Adani Green are key beneficiaries, though valuations remain stretched.
Building Materials: Urbanization and Housing Demand
Cement, Tiles, and Wires
The building materials sector is growing at 12–15% CAGR, driven by affordable housing schemes (PMAY) and commercial real estate expansion.
UltraTech Cement
Volume growth accelerated to 14% YoY in Q3, with pan-India pricing power (₹5,800/tonne). Capacity expansion to 150 MTPA by 2026 aligns with demand.
Wires and Cables
The wires segment is growing at 15% CAGR, driven by EV charging infrastructure and grid modernization. Polycab and Havells are preferred picks, with 22% and 18% earnings growth projected for 2025.
Defensive Sectors: FMCG and IT
FMCG
Rural Recovery and Premiumization
FMCG stocks rebounded 8% in February 2025, aided by monsoon-driven rural demand and urban premiumization.
Hindustan Unilever (HUL)
Volume growth turned positive (2.1% YoY) after 5 quarters, with 12% revenue growth in premium categories like skincare and organic foods.
ITC
Cigarette volumes grew 4% YoY, while hotels and FMCG segments reported 22% EBITDA growth. Demerger of ITC Hotels unlocks ₹35,000 crore value.
IT Services
Margin Expansion and AI Adoption
Despite global headwinds, TCS and Infosys reported 8–10% CC revenue growth in Q3, with margins expanding 150–200 bps due to reduced attrition and automation. Generative AI contracts contributed 12% of deal wins, per Nasscom.
Conclusion
Navigating Uncertainty Through Sectoral Resilience
While 2025 presents challenges from U.S. market linkages and retail investor sensitivity, India’s structural growth story remains intact.
Investors are advised to focus on high-conviction sectors with visibility on earnings, policy support, and low global correlation.
Defense, pharmaceuticals, and infrastructure offer multi-year growth runways, while private banks and FMCG provide stability.
A diversified portfolio with 60% equities (tilted toward large caps), 25% debt, and 15% gold/cash is recommended to balance risk-reward.
Monitoring Q4 earnings and the Union Budget’s capex allocations will be critical to sustaining momentum.
