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

6 Nov 2025 , 12:57 PM

STOCK MARKET BIG PICTURE FOR OCTOBER 2025

How did the Indian stock markets perform in October 2025, in terms of generic, sectoral, and thematic indices? Here is a quick dekko.

• Let us start with generic indices for October 2025. The 1-month returns were positive across most generic indices. The Nifty closed October 2025 with gains of 4.62%. The leader was Nifty Midcap Select at 6.91%. The Mid-cap 100 generated 5.84% returns in the month, while Small-cap 100 gave 4.69%. Alpha hunting was seen in mid-caps.
• What about thematic indices in October 2025? Positive performance was focused on domestic plays like Realty (9.22%), PSU Banks (8.74%), and surprisingly IT (6.89%). Tepid returns were seen in Auto (1.01%), Chemicals (2.02%), and FMCG (2.74%).
• Let us turn to strategy indices in October 2025? The strategies that outperformed were High Beta, Value, and Equal Weight. Some of the strategy indices that lagged included Alpha Quality, Multi-Factor, and Low Volatility.

Let us turn specifically to the sectoral indices and how they ranked in terms of returns, risk, and valuations.

HOW SECTORAL INDICES FARED ON RETURNS IN LAST 1 YEAR?

The table captures the returns on key sectors with ranking on 1-year returns.

Sectoral Index	1-Year Returns	3-Year Returns	5-Year Returns
Nifty PSU Bank	22.50	34.17	46.76
Nifty FS Ex-Bank	21.19	23.98	24.18
Nifty Auto	15.07	27.09	29.35
Nifty Metal	14.76	22.34	37.12
Nifty Financial Services	14.75	14.66	19.48
Nifty Bank	13.13	12.78	20.19
Nifty Private Bank	11.84	10.56	16.88
Nifty Oil & Gas	6.93	14.99	21.87
Nifty Healthcare	2.45	21.27	17.70
Nifty Chemicals	1.82	6.24	21.05
Nifty Consumer Durables	-1.16	13.11	20.16
Nifty Pharma	-1.76	19.73	15.40
Nifty FMCG	-3.15	10.13	15.96
Nifty Realty	-4.88	29.69	33.35
Nifty IT	-9.48	9.79	13.53
Nifty Media	-23.21	-8.85	2.25

Data Source: NSE Indices

There are interesting takeaways from 1 year returns.

• If you look at the top 5 sectors in terms of 1-year returns, 3 are part of the BFSI story. The only other 2 sectors with reasonably good returns are autos and metals. While autos are a combination of domestic demand and GST cuts; metals are riding on the China recovery story. PSU Banks Index led with 22.5% returns in last one year; followed by Nifty NBFCs at 21.2%. Out of the 16 sectors reviewed, 10 gave positive returns and 6 gave negative returns. The worst performers on 1-year returns were Media -23.2%, IT -9.5%, Realty -4.9%, FMCG Sector -3.2% and Pharma -1.8%. BFSI them has emerged as a proxy for Indian consumer spending and domestic demand, as NIM risks have reduced.
• Out of the 16 sectors, 10 sectors gave positive returns in last 1 year, while 6 gave negative returns. The 16 sectors gave average returns of 5.1% in last 1 year, 16.4% CAGR over 3 years, and 22.2% CAGR over 5 years. For now, 5-year returns continue to benefit from the COVID base.

HOW SECTORAL INDICES FARED ON RISK IN LAST 1 YEAR?

Returns are one side of the coin. Risk is the other side of the coin for investors.

Sectoral Index	1-Year Volatility	1-Year Beta	1-Year Correlation	1-Year R2
Nifty Realty	28.06	1.49	0.67	0.45
Nifty Media	23.74	0.92	0.49	0.24
Nifty Metal	23.00	1.34	0.74	0.54
Nifty PSU Bank	22.64	1.06	0.59	0.35
Nifty IT	21.69	1.12	0.66	0.43
Nifty FS Ex-Bank	19.43	1.24	0.81	0.65
Nifty Auto	18.72	1.15	0.78	0.61
Nifty Consumer Durables	18.30	0.99	0.69	0.47
Nifty Oil & Gas	18.30	1.10	0.76	0.58
Nifty Chemicals	17.59	0.90	0.64	0.42
Nifty Pharma	16.65	0.77	0.59	0.35
Nifty Healthcare	15.83	0.79	0.63	0.40
Nifty Financial Services	14.20	0.99	0.88	0.78
Nifty Private Bank	14.18	0.94	0.84	0.70
Nifty Bank	13.50	0.92	0.87	0.75
Nifty FMCG	13.46	0.60	0.56	0.32

Data Source: NSE Indices

The above table is ranked on 1-year volatility (standard deviation of returns) starting with the most volatile sectors to the least volatile sectors.

• In terms of volatility of returns; Realty, Metals, PSU Banks, and IT rank on top. There seems to be lack of sync between returns and risk, indicating there is too much risk per unit of returns in sectors like IT and Realty. Of course, over 5-years, higher volatility in these sectors was offset by higher returns, although those gains are gradually reducing. Interestingly, BFSI has emerged as a low-risk and high return play in last 1 year.
• The 16 sectors had average volatility of 18.7% and average beta of 1.02, approximately coinciding with Nifty. A total of 7 of the 16 sectors were aggressive with beta of more than 1. FMCG and Pharma are the best portfolio diversification bets, due to low correlation with Nifty; and low return explanation factor. BFSI has highest correlation.

SECTORAL INDICES AND THE VALUATION PLAY IN LAST 1 YEAR

Here, we look at sectoral valuations ranked on P/E ratios as of October 2025.

Sectoral Index	Price/Earnings (P/E Ratio)	Price / Book (P/BV)	Dividend Yield
Nifty Consumer Durables	67.35	13.02	0.38
Nifty Media	57.78	1.59	1.42
Nifty Realty	45.02	4.57	0.32
Nifty Chemicals	43.42	4.29	0.93
Nifty FMCG	41.32	10.13	2.04
Nifty Healthcare	38.37	5.48	0.57
Nifty Pharma	33.94	4.80	0.70
Nifty Auto	27.71	4.85	1.11
Nifty IT	25.31	6.68	3.09
Nifty FS Ex-Bank	24.07	4.38	0.83
Nifty Metal	20.03	2.77	1.64
Nifty Private Bank	19.75	2.16	0.54
Nifty Financial Services	17.86	2.83	0.97
Nifty Bank	16.17	2.17	1.01
Nifty Oil & Gas	11.84	1.68	2.17
Nifty PSU Bank	8.38	1.33	2.29

Data Source: NSE Indices

Here are key takeaways from the three valuation parameters.

• Consumer durables, Realty, Chemicals, FMCG, and Healthcare are the richest in valuations. India consumer spending proxies are attracting a lot of buying interest of late. The volatility has made many sectors attractive in dividend yield terms. For instance, IT at 3.09%, PSU Banks at 2.29%, Oil & Gas at 2.17%, and FMCG at 2.04% offer attractive dividend yields. Metals dropped out of this list after the recent rally.
• The average P/E of all sectors stands at 31.15X, higher on MOM basis. The average dividend yield stands at 1.25%.

Sectoral valuations have come under stress after the recent rally. It needs to be seen how the Q2FY26 results are able to justify this rally.