The growing importance of Intellectual Capital (IC) highlights the transition from a traditional to a knowledge-based economy. The research question is whether the relationship between ICE and FP differs between India’s Information Technology (IT) and Healthcare sectors. Additionally, it examines whether firm characteristics have a mediating effect on this relationship. The data spanning from 2008 to 2024 for 37 IT firms and 69 Healthcare firms listed on the Bombay Stock Exchange (BSE) are analysed. The study explores the mediating effects of firm characteristics on the influence of IC on Return on Total Assets (ROTA) and assesses sectoral variations in this effect. Results indicate a sector-specific dynamic, while IC significantly influences ROTA in IT firms, its impact is less pronounced in healthcare firms. Furthermore, the mediating role of firm characteristics, such as firm size, differs between the two sectors. However, firm size consistently mediates the effect of IC on FP in both sectors, providing a common ground. These findings contribute to the literature by highlighting the sector-specific relevance of IC and its management. The study offers actionable insights for managers seeking to optimise FP through strategic IC utilisation in the evolving knowledge economy.