The Sector Detective: How to Identify Key Drivers in Any Sector | Quick ₹eads

by Karnivesh | 1 January, 2026

The Question Every Analyst Asks

A banker and an auto executive walk into a room. Both are proud of their latest earnings reports.

The banker says: "We grew lending by 15% and our NIM is 3.45%."

The auto executive says: "We grew volumes by 10.5% and our ASP increased by 8%."

An untrained investor might think they're talking about the same thing. They're not. The metrics they use, the drivers they track, and the way they create value are fundamentally different.

This is the difference between understanding a sector and merely reading its numbers. And it's what separates investors who pick winners from those who pick losers.

The DNA of a Sector: What Makes It Tick

Every sector has a DNA a unique set of 2-3 drivers that create profitability. Your job as an analyst is to identify them, track them obsessively, and know when they're improving or deteriorating.

The FMCG sector, for example, is driven by:

• Volume (units sold)

• Realization/Price (price per unit)

• Margin (EBITDA or operating leverage)

In Q2 FY25, FMCG volume growth was only 4.1% subdued due to food inflation and rural demand weakness. But price increases contributed 1.5% growth. This tells an analyst: "Companies are pricing power to offset cost inflation, but volume momentum is slowing."​

Contrast this with the Banking sector, where the key drivers are:

• Loan Growth (credit disbursement)

• NIM (Net Interest Margin the spread between lending and borrowing rates)

• RoA (Return on Assets efficiency in deploying capital)

In FY24, Indian banks achieved record loan growth of 15%+, with public sector banks posting record profits of ₹1.41 lakh crore. Why? Because loan growth exceeded NPA (bad loan) growth, and NIMs remained stable at 3.45%.​

Key Drivers Across Sectors: How FMCG, Banking, and Automotive Create Value Differently 

Now look at Automotive, where drivers are:

• Volume (units sold)

• ASP/Realization (average selling price per vehicle)

• EBITDA Margin (operating leverage from scale)

In Q1 FY25, Bajaj Auto grew volumes by 15.7%, but more importantly, ASP increased by 7.9% YoY due to mix improvement in premium motorcycles. This allowed EBITDA margins to expand to 20.2% despite rising input costs.​

Each sector's story is different because each sector's economics are different.

The FMCG Story: When Volume Stalls, Price Becomes King

FMCG is the tale of volume versus pricing power.

From FY22 to FY24, Indian FMCG grew 5-6% annually, driven by rural demand and population growth. But in Q2 FY25, volume growth contracted to 4.1% the lowest in years. Rural demand weakened due to inflation, and urban markets slowed due to weak consumer sentiment.​

The response? Companies like HUL, ITC, and Britannia raised prices. Price increases contributed 1.5% to growth. This is the FMCG playbook: When volume slows, premium pricing offsets volume loss.​

But here's the consultant's warning: Premiumization only works if brand equity allows it. Godrej Consumer, despite raising prices, saw margin pressure because palm oil costs surged. The company couldn't fully pass through costs, eroding profitability.​

The key insight? In FMCG, track both volume AND realization. If volume grows 6% but realization grows 2%, the company is selling more at higher prices textbook value creation. But if volume contracts 2% while realization grows 3%, the company is sacrificing growth to protect margins. That's unsustainable long-term.

The Banking Story: When Loan Growth Exceeds NPA Growth, Profitability Explodes

Banking is elegantly simple: lend more, control bad debts, maintain spread.

In FY23-24, Indian banks faced headwinds. Repo rates were at 6.5%, squeezing NIMs. Yet banks posted record profits because loan growth accelerated to 15%+, while NPAs (bad loans) declined sharply due to RBI reforms.​

The formula is:

Profit Growth = Loan Growth + NIM Improvement − NPA Growth

During FY24, NPA growth turned negative (banks resolved bad loans faster than they accumulated new ones). So even though NIMs stayed flat, profit growth exploded because loan growth outpaced NPA growth.​

Now in 2025, the story is changing. Loan growth is still healthy at 12-14%, but NIM pressure is real as deposit competition rises. Analysts must track:​

1. Loan Growth Rate: Is it accelerating or decelerating? If decelerating, future profit growth is at risk.

2. NIM Trend: Is the spread widening or narrowing? A 10 bp decline in NIM sounds small until you realize it costs major banks ₹500-1,000 Crore in annual profit.

3. NPA Ratio: Is asset quality deteriorating? A 50 bp increase in gross NPA ratio can wipe out years of profit growth.

This is why banking sector analysts obsess over NIM and NPA trends.

The Automotive Story: The ASP-Margin Tango

Automotive has a unique driver structure because vehicles are not commodities a luxury SUV has 5x the margin of an entry-level hatchback.

In Q1 FY25, Bajaj Auto and Maruti Suzuki both reported strong results, but for different reasons:

Bajaj Auto: Grew volumes 15.7% YoY. But the real story? ASP improved 7.9% due to a shift toward premium motorcycles (125cc and above). EBITDA margins expanded to 20.2% from 19.8%. This is mix improvement selling the same volume but at higher prices.​

Maruti Suzuki: Grew passenger vehicle volumes ~17% YoY. But gross margins weakened to 24% due to "aggressive pricing" needed to capture market share in a sluggish economy. EBITDA margins stayed flat at ~13% despite volume growth.​

Same sector. Different stories. Why? Bajaj controls pricing; Maruti competes on volume.

The key driver here? Capacity Utilization and Product Mix.

When a manufacturer operates at 85%+ capacity utilization, pricing power increases. When it operates at 60%, it discounts aggressively to fill capacity. This explains Maruti's margin pressure the company is pushing volume at the cost of pricing.​

The Three-Layer Framework: Finding Profit Drivers in Any Sector

Every business, regardless of industry, ultimately follows the same economic logic. To understand where profits come from and where they can break you need to analyze it across three layers: Revenue, Margins, and Returns. This framework helps you spot inflection points before they show up in reported earnings

Layer 1: Revenue Drivers  What Actually Grows the Top Line

Revenue is rarely a single number; it is usually the product of volume × pricing.

• FMCG:

  Revenue = Volume Growth × Realization (pricing power)

  Growth comes from higher consumption, distribution expansion, and the ability to pass on inflation.

• Banking:

  Revenue = Average Loan Book × Interest Rate (NIM)

  Growth depends on credit demand, balance sheet expansion, and rate cycles.

• Automotive:

  Revenue = Units Sold × Average Selling Price (ASP)

  Driven by demand cycles, product mix (premium vs. mass), and price hikes.

Key insight: Most analysts focus on headline revenue growth. Better analysis asks which component is driving it volume or price and whether it’s sustainable.

Layer 2: Margin Drivers What Converts Revenue into Profit

Margins explain how much of the revenue actually drops to operating profit.

• FMCG:

  Margins are shaped by input costs (commodities, packaging), supply chain efficiency, and distribution leverage.

• Banking:

  Profitability hinges on cost of deposits, cost-to-income ratio, and provisioning for NPAs. A rising loan book means little if credit costs spike.

• Automotive:

  Margins depend on operating leverage, fixed cost absorption, and raw material prices (steel, aluminum, energy).

Key insight: Margins usually turn before revenue slows or accelerates. Cost pressures or operating leverage changes are early warning signals.

Layer 3: Return Drivers What Determines Shareholder Wealth Creation

Returns explain whether growth is actually worth it.

• FMCG:

  Real Growth = Revenue Growth − Inflation

  Combined with capital turns (how efficiently capital is deployed), this determines ROCE.

• Banking:

  Net Profit ≈ (NIM × Assets) − Provisions

  ROAE reflects balance sheet quality and risk discipline, not just growth.

• Automotive:

  Profit = EBITDA Margin × Volume

  Returns are heavily influenced by capital intensity how much CapEx is required for incremental growth.

Key insight: Growth without returns destroys value. High ROCE/ROAE businesses can compound even with moderate growth.

Three-Layer Framework infographic for identifying profit drivers across sectors

The Red Flags: When Key Drivers Start to Crack

FMCG Red Flag: Volume contraction while price hikes accelerate. This signals pricing power is exhausted. Soon volumes will collapse and margins will erode.​

Banking Red Flag: NIM compression while loan growth decelerates. This means the bank is losing customers (growth issue) and losing margin per customer (profitability issue). Danger.​

Automotive Red Flag: ASP declining while volume stays flat. This means the company is sacrificing pricing for volume a sign of weakening demand or competitive pressure.​

The Scorecard

When analyzing any sector:

1. Identify the 2-3 primary drivers. Don't get lost in 10 metrics. Focus on what creates profit.

2. Track trends, not snapshots. Is volume growth accelerating or decelerating? Is NIM expanding or contracting?

3. Understand trade-offs. Higher volume often means lower pricing. Higher pricing often means lower volume. Know which trade-off is sustainable.

4. Compare within sector. Bajaj Auto and Maruti Suzuki operate in the same sector, but different drivers explain their performance. Why?

5. Spot inflection points. When a key driver changes direction (e.g., NIM from expansion to contraction), it signals a structural shift in the business.

The Final Truth

Every sector is a unique ecosystem with its own rules. FMCG rewards pricing power. Banking rewards loan growth and risk management. Automotive rewards mix improvement and capacity efficiency.

The investor who understands these sector-specific drivers doesn't need to analyze 50 metrics. They need to obsessively track the 2-3 that matter, recognize when they're deteriorating, and act before the market does.

That's how winners are built.