Analyzing the Risk–Return Trade-Off: A Sectoral Study of Investment Performance

Abstract

This study examines the relationship between risk and return across five major sectors in the Indian stock market: Information Technology (IT), Banking & Financial Services, Pharmaceuticals, Energy, and FMCG. Using monthly return data for the period April 2020– March 2025, the research applies statistical tools such as standard deviation, beta coefficient, Sharpe ratio, and regression analysis to determine the existence and strength of the risk–return trade-off. Findings indicate that while higher risk generally correlates with higher returns, sector-specific variations exist. The IT and Banking sectors exhibit stronger positive risk– return relationships, whereas FMCG shows stability with modest returns and lower volatility. The results provide insights for portfolio diversification strategies and sector-based investment planning.