Sector leaders and laggards in January 2023

  • 04 Jun 2024
  • Read 7 mins read

A tough January 2023 for stock markets

The month of January 2023 was another disappointing month for the markets as the fall in the Nifty continued. To add to the problems, the FPIs sold $3.52 billion in Indian equities in the month of January 2023 and that added to the woes of the markets. However, it was not just the FPI selling but even the global cues were not too favourable. 

Sector / IndexJanuary 2023 Returns (%)
Small Cap


Nifty 50


Mid Cap


The US Fed continued to be hawkish, although the pace of rate hikes is likely to come down. As you can see in the table below, the large-cap, mid-cap and small-cap indices came under pressure, so it was more about macro concerns than about alpha hunting in the markets. The markets did not really distinguish based on capitalization of stocks. 


January 2023 fall in nifty was about macro triggers

The fall was almost uniform across large caps, mid-caps and small caps with the macro triggers actually driving the direction of the markets. Here are some key factors.

  1. December 2022 saw Fed cutting the pace of rate hikes from 75 bps to 50 bps. However, Fed rates are now already up 425 bps in 2022 alone. The December Fed minutes were not too encouraging with the Fed still talking tough and committing to hike rates till inflation moved surely towards 2.5%. That looks tough amid strong job market and that has led to concerns in the market. RBI may just about follow suit.    
  2. FPI flows were the dampener in January 2023. The first few days saw some residual selling, but the selling just continued through the month. After net FPI inflows of Rs11,120 crore or $1.36 billion in December 2022; the month of January 2023 saw equity selling to the tune of Rs28,852 crore or $3.52 billion.    
  3. The other concern in the Indian markets was that Indian stock market valuations are less attractive compared to its Asian EM counterparts. That has already resulted in a lot of FPI funds flowing out of India into other Asian markets like South Korea, Taiwan and Indonesia with lower average valuations.   
  4. What could eventually work in India’s favour in the coming month could a strongly reformist Union Budget combined with India widening its growth advantage over China. IMF and World Bank have already pegged the Indian economy to be among the fastest growing large economies in 2023 and also in 2024.

The broad narrative is that the RBI and the government have done their bit for inflation and the focus may now shift to bolstering growth.

January 2023 – Sectors that flattered, and sectors that lagged

The month of January 2023 saw a very diverse performance of sectors. Automobiles and IT flattered the street while oil and banks came under immense pressure in January.

Sector / IndexJanuary 2023 Returns (%)


Information Technology (IT)


















Consumer Durables




Private Banks




PSU Banks


Oil & Gas


Data Source: NSE

Let us look at the sectors that did better than the Nifty and sectors that underperformed the Nifty returns in January 2023.

  1. Clearly, it was automobiles that led the way on the back of hopes that a spike in auto demand, falling chip shortage, overflowing order books and revenge buying would help the numbers. There were also expectations that the budget would take a more lenient view on GST on automobiles, which looks unfair at 28%. The other sector was IT which gained 3.91% in January. Results were not impressive, but IT managed to hold on in a tough quarter. Retrenchments are likely to automatically check attrition.   

  2. Among other sectors that did better than the Nifty were essentially new age sectors like defence, logistics and digital. In some cases the returns were in negative, but still better than the Nifty returns. Also, FMCG and pharma saw a lot of safe haven buying in January in the midst of volatile market conditions.   

  3. In terms of sectoral underperformers, Oil & gas and banks were at the bottom of the heap. Oil stocks have come under pressure on falling crude prices and negative marketing margins. Better GRMs were a saving grace. Banking stocks had rallied sharply in the last few months (especially PSU banks) and the sharp correction in January 2023 was more like a return to normalcy.   

  4. Among other sector that performed below the Nifty to a lesser extent were commodities, metals and infrastructure. In the first two cases, the challenge was a downturn in the global commodity cycle. This has been worsened by fears of recession in the US, UK and EU, which could further crimp demand.

In a sense, January 2023 saw the Nifty cautious on global cues, but building expectations ahead of the Union Budget. To an extent, Budget 2023-24 may hold the key to stock market performance in February 2023.