This paper investigates the empirical evidence of the effects of public sentiments on industry stock returns and volatility dynamics in Australia based on the states of the market that relates to the conditional quantiles of public sentiments and sectoral stocks, using the robust nonparametric causality-in -quantile test. We adopt the monthly overall consumer sentiments index and four of its components including the sentiments for rural Australia and the age groups 18–24, 25–44, and 45 and above. Our nine industry stocks include Health Care, Consumer Discretionary, Consumer Staples, Utilities Financials, Real Estate, Industrials, Basic Materials and Energy, with data spanning from October 1974 to October 2020. The results from the nonlinear causality test show a directional and bidirectional causality between measures of consumer sentiments and returns of industry stocks. Interestingly, we note that the sentiments of individuals aged 45 and above cause the returns of all the nine sectors. Next, we explore the predictive power of sentiments on industry stock returns, using the nonparametric causality-in-quantile test. We find that the predictability between sentiments and industry stock returns is high in the normal market state but drops when the consumers’ perceptions enter into the extreme bearish and bullish states. Additionally, the findings show a risk (volatility) transfer from sentiments to the industry stock returns in some cases under different market conditions. We offer some implications based on our findings for the stakeholders and market participants who develop their strategies depending on market conditions and sentiments.