An Empirical Analysis of Risk–Return Trade-off between Banking and IT Sector Stocks in India: Evidence from NSE

Abstract

This study examines the risk–return performance of selected Indian Banking and Information Technology (IT) sector stocks over a 5-year period from April 2021 to March 2026, using the NIFTY 50 as the benchmark index. The sample includes leading banking sector companies such as ICICI Bank Ltd, State Bank of India (SBI), and HDFC Bank Ltd., along with the Indian IT Sector companies like HCL Technologies, Tata Consultancy Services (TCS), and Infosys. From my analysis is based on historical stock price data and important financial values such as yearly returns, Sharpe Ratio values, standard deviation (Instability), Jensen’s Alpha, Beta, Treynor Ratio to assess risk-adjusted efficiency and Indian market awareness. The Capital Asset Pricing Model (CAPM) and Fama-French 3-Factor Model framework is employed to assess expected returns and to measure the extent of abnormal returns generated by the selected securities. The findings indicate that the banking sector has good and stronger performance in terms of risk-adjusted returns, with select stocks visualizing to give positive Jensen’s Alpha, suggesting consistent outperformance over the market benchmark. In contrast, the IT sector shows comparatively higher volatility and moderate lower risk-adjusted returns during the study period, reflecting sensitivity to market fluctuations and global economic conditions. Overall, the study provides meaningful insights into sectoral performance differences and highlights the significance of diversification and gives conclusions to risk evaluation in investment. The results are useful for investors, portfolio managers, and researchers seeking to optimize portfolio efficiency and understand the dynamic relationship between risk and return in the Indian stock market.