December 2025 – How sectors fared on returns, risk, and valuations

30 Jan 2026 , 11:09 AM

WHY RISK, RETURNS, AND VALUATIONS

How do you judge whether a company is good for investing or not? You obviously got to look at returns, risk and valuations. Returns is what the investment has generated in percentage terms over a period of time.  Risk refers to how much of volatility (wild price moves) you have to endure to get these returns.  Valuations is about judging whether the stock is cheap or expensive to invest. Every stock can be cheap and also expensive.

How should investors deal with this data. The ideal choice for investors is great returns, low risk, and cheap valuations. That is tough to get, but not impossible. The stocks to avoid are the ones with low returns, high risk, and high valuations. However, most stocks fall between these two extremes and that is where your judgement comes in. December may have been tough, but in equities you focus on 5-year to 10-year returns; not 1-month or 1-year returns.

SECTORS WITH BEST RETURNS IN LAST 1 YEAR

Here, sectors are ranked on 1-year returns, with longer data also available.

Sectoral Index	1-Year Returns	3-Year Returns	5-Year Returns
Nifty PSU Bank	31.33	26.37	38.55
Nifty Metal	29.90	19.13	29.73
Nifty FS Ex-Bank	28.16	24.83	17.81
Nifty Auto	24.59	31.81	26.30
Nifty Financial Services	18.60	14.43	13.65
Nifty Bank	18.08	12.44	14.61
Nifty Private Bank	16.55	10.29	11.41
Nifty Oil & Gas	15.25	14.11	18.95
Nifty Chemicals	8.22	7.79	17.40
Nifty FMCG	-0.43	9.76	12.28
Nifty Healthcare Index	-1.50	23.10	14.83
Nifty Pharma	-2.25	22.64	12.80
Nifty IT	-10.44	12.07	11.53
Nifty Consumer Durables	-11.75	13.74	13.50
Nifty Realty	-16.30	27.10	23.22
Nifty Media	-19.98	-9.67	-1.97

Data Source: NSE Indices

What is the quick reading from the data? Financials, auto, and metals have done well over 1 year. In fact, financials have done very well over the long run too. Realty, IT, and consumer durables struggled on returns; and longer-term returns were less than flattering.

Key takeaways for Investors: If investors are looking at a serious investment story, Banking & Financial Services (BFSI) is the answer. The bounce in autos and metals as well as the fall in IT and consumer durables may be purely cyclical.

SECTORS ON RISK IN LAST 1 YEAR

Here, sectors are ranked on 1-year Standard Deviation (Risk).

Sectoral Index	1-Year Volatility	1-Year Beta	1-Year Correlation	1-Year R2
Nifty Bank	12.49	0.92	0.87	0.75
Nifty FMCG	12.53	0.58	0.55	0.30
Nifty Financial Services	13.42	1.01	0.88	0.78
Nifty Private Bank	13.43	0.95	0.84	0.70
Nifty Healthcare Index	15.37	0.86	0.66	0.44
Nifty Pharma	16.09	0.84	0.61	0.38
Nifty Chemicals	16.70	0.92	0.65	0.42
Nifty Oil & Gas	17.23	1.10	0.75	0.56
Nifty Auto	17.95	1.17	0.77	0.59
Nifty Consumer Durables	18.17	1.02	0.66	0.44
Nifty Financial Services Ex-Bank	19.33	1.33	0.81	0.66
Nifty IT	21.12	1.18	0.66	0.43
Nifty PSU Bank	21.49	1.03	0.56	0.32
Nifty Metal	22.48	1.40	0.74	0.54
Nifty Media	22.87	0.94	0.48	0.24
Nifty Realty	27.00	1.57	0.68	0.47

Data Source: NSE Indices

Some of the BFSI stocks are ranked low on volatility (risk), despite high beta stocks. FMCG is also low risk, but returns are too low. PSU banks are higher on risk scale, but they make up for it with low R-Squared, which makes it a good portfolio diversification bet. Realty and metals have a problem justifying risk and valuations.

Key takeaways for Investors: BFSI is emerging as a low risk, high return combination. This normally does not last for too long. Hence, investors looking for opportunities in this space will have to act with speed and precision.

SECTORS ON VALUATION IN LAST 1 YEAR

Here, sectors are ranked on 1-year P/E ratio, with longer data also available.

Sectoral Index	Price/Earnings (P/E Ratio)	Price / Book (P/BV)	Dividend Yield
Nifty Consumer Durables	61.25	11.52	0.40
Nifty Media	59.15	1.52	1.29
Nifty FMCG	40.74	10.01	2.00
Nifty Realty	40.46	4.25	0.34
Nifty Chemicals	39.51	4.28	0.61
Nifty Healthcare Index	36.72	5.46	0.57
Nifty Pharma	33.57	4.92	0.68
Nifty Auto	30.61	4.83	1.11
Nifty IT	26.65	7.04	2.96
Nifty Financial Services Ex-Bank	24.36	4.50	0.77
Nifty Private Bank	20.14	2.27	0.54
Nifty Metal	19.91	2.91	1.63
Nifty Financial Services	17.88	2.91	0.84
Nifty Bank	16.40	2.19	0.98
Nifty Oil & Gas	11.33	1.68	2.78
Nifty PSU Bank	8.75	1.40	2.19

Data Source: NSE Indices

BFSI seems to be on a roll. They have low risk, high returns, and attractive valuations in terms of low P/E and attractive dividend yield. For sectors like FMCG, consumer durables, and realty; it is getting tougher to justify the steep valuations.

Key takeaways for Investors: Amidst the rough and tumble of 2025, PSU banks in particular and other financial services in general have emerged as the big idea with low risk, low P/E, attractive dividend yield, and robust returns. That surely makes an investment case.

LLM Summary Why have PSU banks taken markets by storm in 2025? Firstly, their Gross NPAs are at historic lows. Secondly, the loan growth is ready to take off. Thirdly, government is planning a big-bang thrust by merging more PSU banks in its quest for scale. Fourthly, PSU banks are now really competing for retail assets. But above all, they are generating profits at a rapid pace, and that cannot be ignored. Surely, an investment case for retail investors.