Risk–Return Analysis of Nifty 50 and Selected Sectoral Indices in India

This study evaluated the risk–return characteristics of the Nifty 50 and nine selected sectoral indices in India over the period from 1 April 2021 to 31 March 2026. Using an annual risk-free rate of 5.86%, the analysis employed standard deviation, beta, Sharpe ratio, Treynor ratio and Jensen's alpha to compare historical sectoral performance. The findings reveal substantial differences in the return and risk profiles of the selected indices. Nifty PSU Bank emerged as the strongest performer on the basis of annualized arithmetic return, Sharpe ratio, Treynor ratio and Jensen's alpha. Nifty Metal and Nifty Auto also demonstrated comparatively strong performance, while Nifty Pharma and Nifty Realty recorded positive Jensen's alpha estimates. In contrast, Nifty IT and Nifty Media displayed weak risk-adjusted performance, and Nifty G-Sec recorded the lowest Sharpe ratio. These results indicate that the sector generating the highest return is not necessarily the sector with the lowest volatility, and that investment performance should be evaluated using several complementary measures. The study contributes to understanding the historical performance differences between Indian sectoral indices and the broad market benchmark. However, the results should be interpreted within the limitations of the sample period, the use of price-index returns, and the assumption of a constant annual risk-free rate. Further research could extend the analysis by incorporating total-return indices, time-varying risk-free rates, regression-based significance tests for Jensen's alpha and additional measures of downside risk.

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