Best Value For Your Money from RamaKrishnaVadlamudi: Nifty indices trailing returns

Nifty Indices Broad Market and Sector Review – July 2026: Nifty Indices Performance and Valuation at a glance 02Aug2026

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(This is my 530th blog since 2010. Over the years, I have covered global financial markets, with a focus on India, and continue to share insights to help readers understand complex topics in simple language.

The views expressed here are for information purposes only and should not be construed as a recommendation or investment advice. While the author is a CFA Charterholder with nearly 25 years of experience in financial markets, this content is intended to share general insights and does not constitute financial guidance.

Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)

Markets never move in a straight line. Some sectors lead while others slow down. Valuations also change over time. Looking at returns alone does not tell the full story.

This periodic snapshot brings together the latest performance and valuation data for the broad Nifty indices and the major market sectors.

The aim is to understand what the numbers are saying today. It is not to predict what will happen next.

The data in this article are as on 31Jul2026, unless otherwise stated.

This article builds on an earlier article (with data as of 30Apr2026). Please check it if you're interested.

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Nifty 500 Snapshot 30Jun2026

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BSE 500 Versus Nifty 500: Same Market, Different Indices 02Jan2026 (NSE Indices / Nifty Indices) (BSE Indices)

The Hidden Rotation in Indian Markets: Capex Leads, Mid/Smallcaps Rise, Financials Lag 02May026 (NSE Indices, Nifty Indices, Nifty sector indices) (Capital goods sector very broad)

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1 Broad Market Performance

Chart showing Nifty Broad Indices Trailing Returns >

The broad market delivered mixed results over different time periods.

During the last one month, Nifty Next 50 was the strongest performer with a return of 3.0 per cent. Nifty 50 also posted a healthy gain of 2.4 per cent. Nifty Microcap 250 was almost flat.

Looking at the past three months, leadership was different. Nifty Microcap 250 topped the list with a return of 9.8 per cent. Smallcaps and midcaps also performed well.

The one-year picture changes. Nifty 50 delivered a small negative return of 0.4 per cent. In contrast, Nifty Next 50 gained 10.9 per cent. Midcaps, smallcaps and microcaps also remained in positive territory.

The long-term picture continues to be encouraging. Over three, five and ten years, every broad market index has delivered positive annualised returns.

Microcaps have been the strongest long-term performers. Midcaps have also produced excellent returns. Nifty 50 has delivered comparatively lower returns, but still generated healthy double-digit annualised returns over five and ten years.

One important lesson is that market leadership keeps changing. The best-performing index over one year may not remain the best over longer periods.

2 Broad market valuations

Chart showing Nifty Broad Indices Valuation Data >

Performance tells us where the market has been. Valuations give an idea of what investors are willing to pay today.

One commonly used measure is the Price to Earnings (PE) ratio. A higher PE usually reflects stronger growth expectations. A lower PE often suggests more modest expectations.

Among the broad indices, Nifty Next 50 has the lowest PE ratio at 19.5. Nifty 50 is close behind at 20.8.

Midcap 150 trades at a PE of 30.4, while Smallcap 250 has the highest PE ratio at 34.3. Investors are therefore paying much higher prices for smaller companies.

Data for Apr-Jun2026 quarter results indicate a better show by mid- and small-cap companies for which results are announced so far.

The Price to Book (PB) ratio tells a similar story. Midcaps have the highest PB ratio, while Nifty 50 remains more moderate.

Dividend yield also varies across the indices. Nifty 50 offers the highest dividend yield at 1.22 per cent, closely followed by Nifty Next 50.

Midcaps, smallcaps and microcaps have lower dividend yields. This is not unusual because many growing companies prefer to reinvest profits rather than distribute them as dividends.

Overall, larger companies appear more reasonably valued than smaller companies based on current market prices.

3 Sector performance

The sector analysis covers the top 10 sectors by weight in the Nifty Total Market Index as of the latest available data. The sector weights are shown in the table below.

The largest sectors by market weight provide a useful view of where market value is concentrated and how different parts of the market are performing.

Chart showing Top 10 Nifty Sectors by Weight in Nifty Total Market Index – Performance >

As shown in the above chart, the top 10 sectors in Nifty Total Market index have a representation of 82.6 per cent in it.

Sector performance often changes much faster than broad market performance.

Auto has been one of the strongest sectors across one, three and five years. The sector continues to show broad-based strength.

Metal has delivered an impressive recovery over the past year. Telecommunications has also produced strong one-year and three-year returns.

Financial Services remains the largest sector in the market. Its long-term returns have been steady rather than spectacular.

Capital Goods has delivered excellent long-term performance, although it has seen weakness over the past month.

Healthcare has remained resilient across most time periods.

Not every sector has performed well recently. FMCG, Consumer Services and IT have recorded weaker one-year returns.

A month ago, few expected Nifty IT to bounce back with a 17 per cent return after years of weak performance. This shows market leadership can change quickly even after a prolonged period of underperformance.

Just a month ago, many investors had written off India's IT sector. 😃

The key thing is simple. Different sectors perform well at different stages of the market cycle. Leadership keeps changing.

4 Sector valuations

Chart showing Top 10 Nifty Sectors by Weight in Nifty Total Market Index – Valuations >

Sector valuations show where investor expectations are highest.

Financial Services has one of the lowest PE ratios at 16.5. Oil and Gas also trades at a relatively low PE of 10.8.

At the other end of the spectrum, Capital Goods and Healthcare trade at PE ratios above 45. Investors appear willing to pay a premium for their expected future growth.

Dividend yields also differ across sectors.

IT and Oil and Gas offer the highest dividend yields among the major sectors.

Consumer Services offers the lowest dividend yield.

High valuations do not automatically mean a sector is overvalued. Likewise, low valuations do not guarantee better future returns. Valuations simply reflect what the market currently expects.

5 Market monitor

Broad index with the strongest one-month return:

Nifty Next 50

Broad index with the strongest three-month return:

Nifty Microcap 250

Best one-year broad market performer:

Nifty Next 50

Highest long-term performer:

Nifty Microcap 250

Lowest PE among broad indices:

Nifty Next 50

Highest PE among broad indices:

Nifty Smallcap 250

Highest dividend yield among broad indices:

Nifty 50

Strongest sectors over one year:

Auto, Metal and Telecommunications

Lowest sector PE:

Oil and Gas

Highest sector PE:

Capital Goods and Healthcare

Highest sector dividend yield:

6 Key Takeaways

Short-term market leadership changes frequently.

Smaller companies have delivered stronger long-term returns than large companies, but they also trade at much higher valuations.

Large-cap indices currently offer relatively lower valuations and higher dividend yields.

Sector leadership keeps changing. Investors should avoid assuming that today's winning sector will remain the winner tomorrow.

Looking at both performance and valuations provides a better understanding of market conditions than focusing on either one alone.

One interesting thing about markets is that today's leaders are not always tomorrow's leaders. A few sectors currently outside the top 10 in the index may outperform in the future and gradually climb the rankings.

That is why it is useful to keep an eye on the wider market, not just today's largest sectors.

7 Final Thoughts

Markets are dynamic. Every month / quarter brings new winners, new laggards and changing valuations.

That is why it is useful to review the data regularly instead of relying on headlines or short-term market moves.

The purpose of this periodic review is to provide a simple, data-based view of the market. Over time, these updates will also help readers see how trends evolve across market cycles.

In the next edition, we will compare the latest numbers with this month's data and see what has changed.

This article is meant purely for educational purposes. It is not investment advice or a recommendation to buy or sell any security, index or mutual fund.

Past performance does not guarantee future returns. Please do your own research or consult a qualified financial adviser before making investment decisions.

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References:

NSE India introduced 11 new sectoral indices in Jun2026. These indices provide a more consistent way to analyse sector performance and their weights in the Nifty Total Market Index.

Earlier, some sectors, such as Capital Goods, Telecommunications and Consumer Services did not have a dedicated sectoral index, making comparisons less straightforward.

Collected Notes 2026 >