9 mins read . 30 Oct 2023
Most of intuitively know which sector is doing well in terms of returns. At least the sectors with the highest weightage on the Nifty like banks, IT, FMCG, oil and auto are well tracked. However, sector performance is not just about returns, but also about risk and about valuations. Which are the sectors that have given the best returns, lowest risk, and the best valuations. In this segment, we will look to address some key questions.
Sectoral indices offer a unique way to look at the performance of sectors through the lens of various sector indices.
The table is ranked on 5-year CAGR returns since short term returns can often be misleading to explain the equity story.
Sectoral Index | 1-Year Returns | 3-Year Returns | 5-Year Returns |
Nifty Realty | 36.25 | 39.97 | 21.75 |
Nifty Consumer | 7.01 | 23.27 | 19.23 |
Nifty IT | 19.87 | 18.99 | 17.20 |
Nifty Metal | 18.97 | 47.67 | 16.59 |
Nifty PSU Bank | 76.87 | 62.07 | 15.03 |
Nifty Non-Banks | 25.55 | 25.00 | 14.12 |
Nifty Fin Services | 14.21 | 24.04 | 14.09 |
Nifty FMCG | 17.73 | 22.34 | 13.45 |
Nifty Bank | 16.38 | 28.47 | 12.71 |
Nifty Auto | 28.42 | 28.25 | 12.36 |
Nifty Healthcare | 19.27 | 12.50 | 12.17 |
Nifty Oil & Gas | 3.85 | 19.33 | 11.87 |
Nifty Private Bank | 16.76 | 25.74 | 10.79 |
Nifty Pharma | 19.91 | 10.27 | 9.94 |
Nifty Media | 10.31 | 14.30 | -0.68 |
Data Source: NSE
Here are some major takeaways.
The big surprise package in the last 3 years has been the PSU banks, where a combination of better asset quality and improved NII and NIMs did the trick.
How do we measure risk. We look at risk in terms of volatility, Beta, and correlation in the last 1 year. The correlation and Beta are with reference to the Nifty index. Volatility is the extent to which the sector returns fluctuate or deviate from the median. Here are the sectors ranked on 1 year volatility or standard deviation.
Sectoral | 1-Year | 1-Year | 1-Year |
Nifty PSU Bank | 27.57 | 1.46 | 0.54 |
Nifty Metal | 22.79 | 1.39 | 0.62 |
Nifty Media | 21.74 | 0.93 | 0.43 |
Nifty Realty | 19.48 | 1.02 | 0.53 |
Nifty IT | 18.01 | 1.15 | 0.65 |
Nifty Oil & Gas | 14.98 | 0.94 | 0.63 |
Nifty Non-Banks | 13.46 | 1.04 | 0.79 |
Nifty Auto | 13.18 | 0.79 | 0.61 |
Nifty Private Bank | 12.99 | 1.06 | 0.83 |
Nifty Bank | 12.96 | 1.07 | 0.84 |
Nifty Fin Services | 12.29 | 1.06 | 0.88 |
Nifty Healthcare | 12.02 | 0.43 | 0.36 |
Nifty Pharma | 12.01 | 0.39 | 0.33 |
Nifty FMCG | 11.45 | 0.61 | 0.54 |
Nifty Consumer | 11.16 | 0.61 | 0.55 |
Data Source: NSE
Here are the key takeaways from the risk analysis of sectors.
PSU banks and metals have been virtual proxies for the Nifty, so a defensive strategy may need to include the low risk names also for the sake of diversification.
Let us also look at how the sectors stack up on key measures of valuation like the P/E ratio, Price to book ratio and dividend yield. That is captured in the table below.
Sectoral Index | Price/Earnings | Price / Book | Dividend |
Nifty Consumer | 63.30 | 9.23 | 0.45 |
Nifty Realty | 47.68 | 3.66 | 0.35 |
Nifty FMCG | 42.64 | 10.77 | 1.86 |
Nifty Healthcare | 36.75 | 4.63 | 0.68 |
Nifty Pharma | 32.55 | 4.20 | 0.85 |
Nifty IT | 26.74 | 6.93 | 2.51 |
Nifty Auto | 25.61 | 4.61 | 1.04 |
Nifty Metal | 24.88 | 2.06 | 3.11 |
Nifty Non-Banks | 20.19 | 3.29 | 1.03 |
Nifty Fin Services | 18.46 | 3.09 | 0.83 |
Nifty Private Bank | 18.38 | 2.64 | 0.65 |
Nifty Bank | 16.39 | 2.59 | 0.83 |
Nifty Oil & Gas | 8.91 | 1.44 | 2.40 |
Nifty PSU Bank | 8.01 | 1.20 | 2.04 |
Nifty Media | 0.00 | 2.44 | 0.39 |
Data Source: NSE
Here are some of the key takeaways on the valuation story.
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