Indian Stock Market March 2026: Sector Winners & Losers

STOCK MARKET BIG PICTURE IN MARCH 2026

How did the Indian stock markets perform in March 2026, amidst the war and which were the best and worst sectors.

1. Let us start with generic indices for March 2026. It was double-digit carnage all across. Nifty Next 50 was the worse performer at -13.26% returns. A total of 20 out of the 21 indices fell more than 10% in March, with only Nifty Mid-Cap Select falling -9.88%.
2. March 2026 was a sort of Waterloo for rate sensitives. Autos, Private Banks, PSU Banks, Financial Services, and Realty; all corrected more than -15% in March. Pharma and healthcare were the best performing sectors, falling just 3-4% in March 2026.
3. Most of the strategy indices also fell more than -10% in March. The relative better performer was Quality Strategy, which fell around -8.34%. Momentum, value, Alpha; all these factor strategies took a sharp hit in March 2026.
4. What about fiscal year FY26 returns? Nifty fell 3.33% for the year, but mid-cap indices gave positive returns across. Among sectors, the best performers for FY26 were PSU Banks (26.6%), Metals (23.6%), and Auto (12.8%). Not surprisingly, worst performing sectors in FY26 were Realty, IT, FMCG, Cement, and Chemicals.

PSU banks have been the worst performer in March, but despite that, they emerged as the best performer for FY26.

HOW SECTORAL INDICES FARED ON RETURNS IN LAST 1 YEAR?

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

Data Source: NSE Indices

There are interesting takeaways from sectoral returns analysis

1. The last one year has been a year of mixed performance with only 7 out of 17 key sectors giving positive returns and 10 sectors giving negative returns. While PSU Banks, Metals and Autos are the best performers; IT and Realty lagged in FY26.
2. The good news is that over a 3-year period and 5-year period; all the sectors (barring media) have given positive returns. The best performers across 1-year, 3-years and 5-years are the same 3 sectors; PSU Banks, Metals, and Auto.
3. Sectors like IT and FMCG continue to lag on long-term returns too, even as healthcare has been a much better long-term performer among the defensive sectors.

Let us now take a look at the risk aspect of sectoral indices.

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.

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.

1. What about volatility / return correlation? While realty and IT have not justified the higher volatility in prices, metals and PSU banks have managed to give attractive returns to justify the higher risk entailed in these stocks in FY26.
2. Over the last one year, just 10 out 17 sectors were aggressive sectors with Beta of more than 1. The remaining 7 were defensive with Beta of less than 1. Only healthcare and FMCG have shown genuinely low beta in last 1 year.
3. R-Squared shows the extent to which sector returns are explained by Nifty movements. Lower the R-Squared, better the sector for diversification. The surprise story of FY26 was Pharma & Healthcare with low beta, low R-Squared and stable returns in a tough year.

Let us finally turn to how valuations of various sectors stack up?

SECTORAL INDICES AND THE VALUATION PLAY IN LAST 1 YEAR

Here, we look at sectoral valuations ranked on P/E ratios as of January 2026.

Data Source: NSE Indices

Here are key takeaways from the valuation parameters.

1. In terms of valuations (P/E) ratio, PSU banks are trading at just 7.76X earnings, despite the sharp rally in last one year. Oil & Gas is the other sector with low P/E of 9.00X.
2. Consumer Durables, healthcare, and chemicals are the high-P/E stories of FY26, although the valuations are substantially down from peak levels.
3. There are 3 sectors with dividend yield of over 2%; with IT at an imposing 3.64%, the best dividend yield seen in IT. It is available at an average P/E of just above 20.

PSU banks have emerged as the long-term story of the last 3-5 years, while FY26 has been dominated by healthcare, on risk, returns, and ability to diversify risk!