Do hot themes stay hot?

March 2020. Markets had just crashed, and one share of Tata Steel cost about 25 rupees, in today's share terms.

Seventeen months later, it touched 153 rupees. Six times the price, in under a year and a half.

Go back to April 2015, and Sun Pharma, the biggest name in India's pharma boom, touched a record 1,200 rupees.

Both were famous names in a red-hot theme. What happened next to each of them is part of this story.

Because behind every hot stock sits the same question: does a hot theme stay hot? Instead of guessing, we went back through sixteen years of Indian market history and counted.

In this video: how we measured a hot theme, what usually happened next, the catch inside the average, real stories with real companies, and at the end, five things worth watching.

Here is the problem with stories. When a theme is running, every headline explains why it must keep running. When it falls, every headline explains why the fall was obvious.

Memory keeps the dramatic cases. A count does not care about drama. So we set the rules first, and then let the history answer.

We used Quantitude's sector and theme indices: 88 groups of Indian stocks, tracked from April 2010 to June 2026.

Each group is an equal-weight index of its liquid stocks, the ones that traded at least one crore rupees a day. Stocks that were later delisted stay in the history.

That matters. Leave out the companies that failed, and every history looks better than it really was.

Next, a fair definition of hot. We compare each group with the Nifty 500, and ask one question: how far has it run ahead of the market, measured from its weakest point in the last three years?

If a group has gone two to three times further than the market, we call that a two-to-three-times run-up. Three to four times is hotter still.

An episode starts in the first month a group crosses into one of these zones. So that one long rally is not counted again and again, the same group must wait two years before it can count in that zone again.

Then we look ahead. One year later, and three years later, was the group ahead of the Nifty 500 or behind it? And how deep was the worst fall along the way?

Ahead or behind is measured fairly. If the Nifty 500 rose 10 percent and a group rose 21 percent, the group is 10 percent ahead, not 11.

First, a baseline. In ordinary times, when a group had run less than twice as far as the market, the next year looked like a coin toss. The median group ended 3.7 percent behind the Nifty 500.

Now the hot ones. 49 times, a group crossed into the two-to-three-times zone.

Over the following year, the median one finished about 15 percent ahead of the Nifty 500. That is from 41 cases with a complete year of history.

Over three years, 25 cases are complete. The median one ended about 67 percent ahead of the Nifty 500, and 8 of the 25 ended up behind it. Hold that big number loosely, for a reason we will come to.

Even the three-to-four-times zone, the hottest one with enough cases to read, was about 7 percent ahead after one year, across 13 cases.

Above four times, there are only five cases. Five cases are not a pattern.

So the first answer surprises most people. In this history, hot themes usually did not cool off straight away.

But look at the path, not just the destination.

For those 25 complete cases, we measured the worst fall from any peak during the next three years. The median worst fall was close to a third: 31.5 percent.

14 of the 25 fell by 30 percent or more at some point. One fell 83 percent.

A theme can end up ahead and still drag its holders through a fall that most people would not stay for. The median hides that.

And here is the part most people do not expect. Groups that were not hot at all had almost the same median worst fall over three years: 30 percent. For a single sector, deep falls were the normal ride, hot or not.

One more honesty check. 15 of the 25 cases started between 2021 and 2023, when one broad rally lifted many groups together. That is why the three-year number is so large. These are not 25 separate experiments. It is one history, seen from many angles.

There is a second way to read heat. Not how far a group has run, but how many of its stocks are taking part.

For every group, we tracked the share of its stocks trading above their own 200-day average. A broad move has most of them above that line. A narrow one rests on a few names.

When 80 percent or more of a group's stocks were above the line, the median group was 8.3 percent ahead of the Nifty 500 a year later. That is from 231 cases.

When fewer than 40 percent were above it, the median group was 2.6 percent behind, across 242 cases.

Even the broad case came with no promise. About 4 in 10 of those 231 still finished the year behind the market.

Averages are tidy. Real episodes are not. Here are four, with two real companies inside them, and every one is at least three years old.

In each chart, the line shows the group against the Nifty 500, starting at 100 on the day it turned hot. Above 100 means it was ahead of the market. Below 100 means it was behind. The red band marks its worst fall.

Housing finance, July 2017. The group had run about two and a half times further than the market, and it was one of the market's favourite stories.

Over the next three years, it ended 77 percent behind the Nifty 500. At the low point, the group index was 83 percent below its peak.

That is what the median does not show. When a hot theme breaks, it can break all the way.

Generic pharma shows how much timing matters inside one theme. In April 2013, the group crossed two times. Three years later, it was 116 percent ahead of the Nifty 500.

Two years on, in April 2015, the same theme crossed into the same zone again. This time, three years later, it was 23 percent behind.

Same theme. Same signal. Opposite outcomes.

Now the company inside that second story. Sun Pharma was the biggest name in the theme, and in April 2015 it touched its record of 1,200 rupees.

By December 2018, it was back at 399 rupees, a price last seen in March 2013. In May 2019, it touched 350 rupees, about 70 percent below the record.

Over the same four years, the pharma group as a whole ended just 4 percent lower. The theme went sideways. Its most famous stock lost about 70 percent.

It took until October 2022, more than seven years, for the stock to trade above 1,000 rupees again.

Drug ingredients and contract manufacturing, July 2020, in the middle of the pandemic. The group had run more than twice as far as the market.

One year later, it was still 20 percent ahead. But three years in, it was 29 percent behind, with a worst fall of 45 percent on the way.

Iron and steel, July 2021, three times the market. The first year went badly: 25 percent behind the Nifty 500.

Then the cycle turned, and three years from the start it was 42 percent ahead. Judge it after one year, and it looks like a failure. Judge it after three, and it looks like a success.

Tata Steel sat in that group. From about 25 rupees in March 2020, it touched 153 rupees in August 2021.

Then came the fall. By June 2022, it was at 83 rupees, 46 percent below its peak, in just ten months.

And two years after that, in June 2024, it touched a new record of about 185 rupees.

So which was the real Tata Steel story, the crash or the record? Both. It depends on the day you looked.

Now put each company next to its own group, on the same dates.

From March 2020 to August 2021, Tata Steel rose a little more than its group. In the fall that followed, it dropped 46 percent. Its group dropped 21.

Sun Pharma lost about 70 percent while its group ended just 4 percent lower.

A group spreads its ups and downs across many companies. A single stock carries all of its own: its results, its debts, its surprises. Inside a hot theme, one stock can do far better than its group, or far worse.

None of this is new to research. In 1993, Narasimhan Jegadeesh and Sheridan Titman found that recent winners kept winning for three to twelve months in their sample.

In 1985, Werner De Bondt and Richard Thaler found the reverse over longer spans: past losers went on to beat past winners over the next three to five years. They called it overreaction.

Both papers studied American stocks, decades ago. It is striking how closely sixteen years of Indian sectors rhyme with them.

Put together, the Indian history looks familiar. Strength often carried on for a while, and when the bill came, it often came all at once.

Before using any of this, know what the study cannot tell you.

These are price indices. They leave out dividends, trading costs and taxes, and an equal-weight index of every liquid stock is not something any one person actually held.

Many groups are small, from five stocks to a few dozen, so one company can move a whole index.

And the windows overlap. One rally or one crash shows up in many cases at once.

So read these numbers as a careful description of the past, with wide error bars, not as a rule.

So what can a retail investor take from all this? Not a forecast. Five things worth watching.

One. How far has the theme already run against the market? Two to three times was common in this history. Beyond four times, there were only five cases.

Two. How many of its stocks are rising? A broad move rested on many companies. A narrow one rested on a few.

Three. The stock against its theme. A single company can fall much further than its group, the way Sun Pharma did.

Four. The size of the fall along the way. Even hot groups usually fell about a third from a peak, and a single stock like Tata Steel fell further.

Five. The time frame. Tata Steel looked like a failure in 2022 and a record-breaker in 2024. A story that needs three years cannot be judged in one.

None of these says what to do. They tell you what you are looking at.

To sum up. In this history, hot themes usually stayed ahead for a year or more. The typical one still fell about a third along the way. And the famous single stocks swung much harder than their themes.

History informs. It does not predict. Nothing in this video says anything about any theme or company today.

The method, every number and the sources are on the episode page at quantitude.in. If this was useful, subscribe for the next deep dive.