Of course it would give you null. Your first conditional expression produces - 'AAA' or 'MMM' or null based on your data, and second expression gives similarly - 'CCC' or 'DDD' or null. That means after combining (I am assuming that you are putting them correctly to avoid any syntax error), your expression evaluation becomes something like:
<a text/ null> OR/AND <a text/ null>
And this will of course result in null.
Instead, you would probably need something like:
= if(state ='HYD',
if(category='Apple','AAA',
if(category='Mango','MMM', if(state ='BANG',
if(category='Apple','CCC',
if(category='Mango','DDD))) )))
