According to analysts, the decline in stocks in these sectors was driven by factors such as weak consumer demand and inflationary pressures in FMCG, growth headwinds from artificial intelligence in IT services, and export-related challenges in the US market for pharmaceutical companies. Their stock performance was also weighed down by record equity valuations at the end of calendar year 2024 (CY24).
There are, however, early signs of a turnaround in defensive stocks, with the Nifty Pharma rallying 12.7 per cent year-to-date after declining 2.9 per cent in CY25. IT stocks, too, have rallied over the past two weeks. The Nifty IT Index is up 13.8 per cent month-to-date in October, compared with a 1.2 per cent rise in the Nifty 50 over the same period.
Analysts attribute the potential turnaround to the valuation de-rating of defensive stocks over the past two years, which has significantly narrowed their valuation premium over the Nifty 50 and the BSE Sensex. In fact, most IT services companies now trade at lower trailing price-to-earnings multiples than the benchmark indices, potentially improving the risk-reward proposition for long-term investors. Moderating valuations, coupled with cash-rich and debt-free balance sheets, make leading defensive stocks attractive for investors looking to accumulate shares.
Here is a look at 10 stocks across these three defensive sectors that offer a balance of reasonable valuations, near- and long-term earnings growth potential, high return on equity and relatively low valuation multiples.
