Market efficiency and sectoral heterogeneity in the BSE 100 ESG Index: a time-series and Fama–French factor approach

Purpose This study examines the weak-form market efficiency, factor-driven return behaviour and sectoral financial performance of the BSE 100 ESG Index in India. Design/methodology/approach The study adopts a quantitative research design using secondary data. Monthly-closing values of the index from October 2017 to November 2025 were analysed using ARIMA modelling, autocorrelation diagnostics, Ljung–Box statistics and the Wald–Wolfowitz runs test to evaluate weak-form market efficiency. The Fama–French three-factor model was employed to assess risk-adjusted returns using market (MF), size (SMB) and value (HML) factors. Sectoral financial differences among constituent firms were examined through one-way analysis of variance (ANOVA) and Duncan post hoc analysis using indicators such as dividend yield, quarterly sales and return on capital employed (ROCE). Findings The ARIMA (0,1,0) model, insignificant runs test and non-significant autocorrelation structure indicate that the index follows a random walk process, supporting the weak-form efficient market hypothesis. The Fama–French model was statistically significant, with the market factor exerting a strong positive influence on ESG excess returns. The size factor showed a significant negative relationship, indicating large-cap dominance, while the value factor and alpha were insignificant. Sectoral analysis revealed significant differences, with energy leading in sales and dividend yield, and FMCG and industrials demonstrating higher capital efficiency. Originality/value The study contributes to the ESG literature in developing economies by integrating market efficiency testing, multifactor asset pricing and sectoral financial evaluation within the Indian ESG context.