September 2025 – How sectors fared on returns, risk, and valuations?

3 Oct 2025 , 05:30 PM

STOCK MARKET BIG PICTURE FOR SEPTEMBER 2025

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

• Let us start with generic indices for September 2025. The 1-month returns were positive across most generic indices. The Nifty closed September 2025 with gains of 0.77%. The leader was Nifty Next-50 at 3.21%. The Mid-cap 100 generated 1.47% returns in the month, while Small-cap 100 gave 1.99%. Some signs of alpha hunting for sure.
• What about thematic indices in September 2025? Positive performance was focused on domestic plays like PSU Banks (11.41%), Metals (9.73%), and Auto (6.34%). Under stress were IT Index (-4.34%), Consumer Durables (-3.79%), and Chemicals (-2.89%).
• Let us turn to strategy indices in September 2025? The strategies that outperformed were Value, Multi-Factor, and Equal Weight. Some of the strategy indices that lagged included Alpha, Flexicap Quality, 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	12.14	36.92	43.94
Nifty Financial Services	7.35	15.24	20.66
Nifty FS Ex-Bank	6.25	22.33	23.28
Nifty Bank	3.95	13.19	21.45
Nifty Private Bank	0.41	10.67	18.21
Nifty Metal	-0.73	20.97	36.81
Nifty Auto	-0.88	28.89	28.60
Nifty Healthcare Index	-3.58	20.64	15.95
Nifty Chemicals	-6.18	6.06	20.73
Nifty Pharma	-7.19	19.14	13.59
Nifty Oil & Gas	-12.43	14.76	19.86
Nifty Consumer Durables	-14.74	11.40	19.33
Nifty FMCG	-14.83	9.08	15.08
Nifty IT	-17.96	9.82	13.23
Nifty Realty	-20.79	27.36	32.98
Nifty Media	-27.30	-8.78	0.54

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, they are all part of the BFSI story. The only other 2 sectors with reasonably good returns are autos and metals, so it is largely a domestic theme party. PSU Banks Index led with 12.1% returns in last one year; followed by Nifty Financial Services at 7.4%. Like in August, 11 out of 16 sectors gave negative returns; with the worst being Media -27.3, Realty -20.8%, IT 18.0%, FMCG Sector -14.8% and Consumer Durables -14.7%. BFSI has emerged as veritable proxies for Indian consumer spending and domestic demand, despite the NIM risks.
• Out of the 16 sectors, 5 sectors gave positive returns in last 1 year, while 11 gave negative returns. The 16 sectors gave average returns of -6.03% in last 1 year, 16.11% CAGR over 3 years, and 21.52% CAGR over 5 years. For now, 5-year returns continue to look flattering due to 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	28.75	1.52	0.68	0.46
Nifty Media	24.70	0.96	0.50	0.25
Nifty PSU Bank	23.53	1.12	0.61	0.37
Nifty Metal	23.34	1.34	0.74	0.55
Nifty IT	21.85	1.08	0.64	0.40
Nifty FS Ex-Bank	20.04	1.28	0.82	0.67
Nifty Auto	19.69	1.19	0.78	0.61
Nifty Consumer Durables	18.78	1.02	0.70	0.49
Nifty Oil & Gas	18.78	1.13	0.77	0.60
Nifty Chemicals	18.56	0.94	0.65	0.42
Nifty Pharma	17.12	0.75	0.56	0.32
Nifty Healthcare Index	16.28	0.76	0.61	0.37
Nifty Financial Services	14.80	1.01	0.88	0.77
Nifty Private Bank	14.74	0.96	0.84	0.70
Nifty Bank	14.22	0.95	0.86	0.74
Nifty FMCG	13.88	0.59	0.54	0.30

Data Source: NSE Indices

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

• In terms of standard deviation of returns; Realty, PSU Banks, Metals and IT rank on top. There seems to be lack of sync with returns and risk, indicating there is too much risk per unit of returns. IT and Realty are examples. Over 5-years, higher volatility in these sectors was offset by higher returns. BFSI has now become a low-risk play.
• The 16 sectors had average volatility of 19.3% and average beta of 1.04, approximately coinciding with Nifty. A total of 9 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 high correlation.

SECTORAL INDICES AND THE VALUATION PLAY IN LAST 1 YEAR

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

Sectoral Index	Price/Earnings (P/E Ratio)	Price / Book (P/BV)	Dividend Yield
Nifty Consumer Durables	67.54	12.52	0.38
Nifty Media	61.75	1.60	1.45
Nifty Chemicals	43.49	4.20	0.92
Nifty Realty	42.51	4.19	0.34
Nifty FMCG	40.45	9.86	2.11
Nifty Healthcare Index	37.17	5.27	0.59
Nifty Pharma	33.07	4.64	0.71
Nifty Auto	27.52	4.80	1.12
Nifty IT	24.29	6.30	3.23
Nifty FS Ex-Bank	22.79	4.13	0.82
Nifty Metal	19.20	2.62	1.74
Nifty Private Bank	17.77	2.04	0.57
Nifty Financial Services	17.14	2.71	1.00
Nifty Bank	15.09	2.06	1.07
Nifty Oil & Gas	12.04	1.58	2.31
Nifty PSU Bank	7.82	1.23	2.49

Data Source: NSE Indices

Here are key takeaways from the three valuation parameters.

• Consumer durables, Chemicals, Realty, FMCG, and Healthcare are the richest in valuations. India consumer spending proxies like FMCG, consumer durables and financials still attract buying interest. The volatility has made many sectors attractive in dividend yield terms. For instance, IT at 3.23%, PSU Banks at 2.49%, oil & gas at 2.31%, and FMCG at 2.11% stand out. Metals have gone out of this list after the recent rally.
• The average P/E of all sectors stands at 30.6X, higher on MOM basis. The average dividend yield looks relatively attractive at 1.30%.

Sectoral valuations have come under stress after the relatively disappointing first quarter results made pricing look steeper.