Risk–Return and Portfolio Optimization of Selected Energy Sectors in India

Abstract

This study empirically examines the risk–return characteristics and portfolio optimization of selected energy sector stocks in India with reference to the Nifty 50 index, using secondary data for the period 2015–16 to 2024–25. A purposive sample of two leading energy companies associated with the Nifty 50 is analysed through descriptive statistics, beta estimation, Jarque–Bera normality tests and Augmented Dickey–Fuller unit root tests to assess volatility, distributional properties and stationarity of daily log returns. The results show low average returns but high volatility, pronounced negative skewness and extreme kurtosis for the Nifty 50, ADANI and NTPC, indicating substantial downside risk and strong deviations from normality, while beta values reveal heterogeneous market risk profiles, with ADANI behaving as an aggressive stock and NTPC as a defensive stock. ADF test outcomes at level and first difference confirm that the energy sector return series are strongly stationary with mean-reverting behaviour, providing a robust econometric foundation for applying time-series and volatility models in portfolio construction. The findings highlight that Indian energy sector stocks offer both significant risk and diversification potential, and that careful evaluation of their risk–return and stationarity properties is essential for designing optimal portfolios aligned with investor risk preferences in the Indian equity market.