The Indian stock market has thousands of companies, and it’s easy to become paralysed by the prospect of deciding one to invest in. To make things easier for investors, the stock market is divided into many sectors that feature companies with comparable qualities.
The various stock market sectors have multiple advantages, including assisting investors in building well-diversified investment portfolios and understanding market behaviour.
You must have noticed the stock market making news about how one sector dominated the market. Some sectors, like healthcare and consumer goods, experienced significant growth, especially with the advent of COVID. Others, like aviation, didn’t appear to have been able to glimpse the other side of the door until very recently.
Therefore, let’s understand why one sector is thriving while another is struggling to exist. In addition, choose which sector deserves a spot in your portfolio depending on your investing strategy.
What Are Sectors In Stock Market?
The stock market intrigues everyone, which may be a good thing. India, like every other country, has carved itself a place in the stock market.
As the stock market has grown in prominence, numerous stock market sectors have emerged. This can meet the demands of all investors and simplify the management of their holdings.
Before considering which sectors to invest in, it is critical to understand the several sorts of sectors in the stock market (assuming you already understand the different types of stock markets).
Sectors in the stock market are simply a means to categorise Indian equities according to the industry type in which they operate. With over 1900 companies registered on stock exchanges, the market is like an unending curveball. This makes it difficult for an investor to separate them, particularly when a stock market segment is in decline.
Market sectors assist investors in determining where to park their money depending on market performance and in diversifying their portfolios based on the best-performing equities in that sector. This post will go through some of the best-identified equities based on their share market sectors.
The Indian stock market is segmented into many sections that function as the wide classification for the many publicly traded companies.
Sectors facilitate investor and portfolio management decision-making and efficiently distribute the corresponding portfolio’s funds.
How Many Different Market Sectors Are There?
The stock market has been divided into many sectors because of its rapid growth. However, the question of how many stock market sectors remains. There are 11 main sectors that make up the stock market. The wide categories make the task of portfolio managers easier. The traders can make their selections based on their requirements and then design their portfolios by choosing from a variety of sectors. The publicly listed companies on the stock market vary depending on the sector. Profitability is impacted by the distinctive characteristics of each company in the sector.
There are many Exchange Traded Funds (ETFs) that might help you further with your asset allocation objectives. You can utilise a variety of characteristics to assist you in properly analysing stocks and, ultimately, making the best possible investing decisions.
Different Sectors In the Indian Stock Market
Now that we are aware of the sectors and their importance, let’s examine the various Indian stock market sectors and how they are used
These are the stock market’s 11 main sectors:
- Banks & Financial Services Sector
- Automobile Sector
- Energy Sector
- FMCG Sector
- Information Technologies
- Healthcare
- Industries
- Tele-communication
- Real Estate
- Construction materials
- Consumer Durables
To better comprehend each sector, let’s go into more detail now for better understanding.
- Banks & Financial Services Sector
What distinguishes the banking sector is that it produces money from money. Banks’ profits are obtained from the cash flows of every other firm in the market.
This is due to the fact that practically every other firm seeks bank financing to manage its capital structure. This is why earnings from financial corporations are separated from profits from non-financial companies. As a result, a sectoral approach to investing allows for this diversity to be accounted for. Non-banking financial companies (NBFCs), asset management companies (AMCs), rating and research institutions, insurance companies, and public and private banks are all part of this huge industry.
NBFCs bank with the unbanked. Mutual Funds are managed by AMCs. Rating agencies focus on credit ratings while also earning money from research materials. Insurance companies aggregate modest sums from a large number of people to cover the loss of a select few.
- Automobile Sector
This sector involves more than simply car makers. It also contains commercial vehicles, 2-wheeler, 3-wheeler, and tractor manufacturers. Because India is an agricultural economy, manufacturers of tractors and commercial vehicles have a strong following within the Indian investing community. The Indian market does not have a pure-play electric vehicle manufacturer like Tesla. Any change, though, is never far away.
- Energy Sector
Companies in the energy sector provide energy sources, equipment, and services. Drilling, energy exploration and production, storage and transportation, marketing, refining, and other services are provided by companies in this sector. Most renewable energy companies are not part of the energy sector. Instead, it is dominated by oil and gas, as well as coal and other consumable fuels.
- FMCG Sector
FMCG Sector company makes the goods that we frequently purchase and utilise. These products are quickly consumed. FMCG items ensure a consistent flow of revenue, which results in consistent earnings and a great return on investment.
The FMCG industry can weather economic downturns. Therefore, your local food stores will be busy selling FMCG companies’ items even on terrible economic days.
- Information Technologies
The stock market’s technology sector includes all technological industries, companies, software producers, and information technology companies. Information technologies include computer components, microprocessors, and operating systems. Companies such as Microsoft are affiliated with the stock market’s technology sector.
- Healthcare
Health care is an integral component of every economy, making it an important stock market sector. The stock market’s healthcare sector includes medications, hospital management, pharmaceutical businesses, medical equipment makers, and so on. Johnson & Johnson is one of the largest firms in the healthcare industry. Several implant manufacturing businesses are also part of the stock market’s healthcare sector.
- Industries
Excellent and successful industries are essential to every economy. The industrial sector has a large number of companies on the stock market. This can include railway, aeroplane, and even weapon manufacturing industries/companies. The industries sector is one of the widest and so has 14 separate sectors. The majority of businesses are involved in logistics, various sorts of equipment, and transportation.
- Tele-communication
Because communication is the foundation of all societies, the telecommunications industry keeps people linked. The communication industry is divided into two segments. The initial phase involves wireless services, cables, and even traditional conventional telephone lines that assist individuals in connecting. This sector’s importance has grown in recent years since it now includes the media and entertainment industries. This is the second division of the communication industry.
- Real Estate
Real estate is one of the several stock market industries. The real estate industry is divided into two categories. Various stocks are accessible to play an important part in the establishment of new houses and residences. Additionally, these are made available for rent, which brings in money. The main source of income in the real estate industry is the rent from these homes, offices, and other locations.
- Construction Materials
The materials system includes a wide range of enterprises, including mining corporations and chemical manufacturing companies, that are responsible for delivering items for manufacturing and numerous other applications. Companies in this sector are located at the very beginning of the regular cycle. This implies that it has the potential to affect the entire business cycle.
- Consumer Durables
Consumers are unable to exclude many things from their budgets. This covers both food and beverage firms. These businesses are classified as consumer durables. Even if economic growth suffers, these enterprises will be able to weather the storm. The consumer staple industry includes supermarkets, personal items, and so on.
List Of Best Sector-wise Stocks (As on 2nd November 2022)
| Company | Sector | Market cap (in Cr) | Market Price (in Rs) | 5 Year Growth % |
| HDFC Bank Ltd. | Banks & Financial Services Sector | 8,40,342 | 1,488.43 | 64.32% |
| Maruti Suzuki India Ltd. | Automobile Sector | 278,141 | 9,210.00 | 12.05% |
| Reliance industries | Energy Sector | 1,724,326 | 2,548.05 | 172.10% |
| Nestle India Ltd. | FMCG Sector | 197,217 | 20,407.07 | 163.26% |
| Tata Consultancy Services Ltd. | Information Technologies | 1,170,823 | 3,200.00 | 144.27% |
| Sun Pharmaceutical Industries Limited | Healthcare | 249,782.00 | 1,041.25 | 88.89% |
| Larsen & Toubro Limited | Industries | 280,426 | 1,995.65 | 61.63% |
| Bharti Airtel Ltd | Tele -communication | 464,679 | 820.05 | 68.14% |
| DLF Ltd. | Real Estate | 95,918 | 388.12 | 87.09% |
| UltraTech Cement Ltd. | Construction Materials | 200,251 | 6,846 | 55.31% |
| Whirlpool of India Ltd. | Consumer Durables | 19,380 | 1,555.58 | 11.85% |
Factors To Consider Before Investing In A Market Sector
It is critical for an investor to recognise that even if an industry is in the spotlight, it is still necessary to analyse some of the crucial factors before making an investment choice.
- Financial Stability
If you decide to invest in a certain sector based on the records made that year, you must examine the financial health of the firm in that area. You must determine if the firm can pay its bills and has future earning potential.
- Appetite For Risk
Before making an investment decision, you must consider your risk tolerance. Some industries may appear to be very tempting, yet they are really risky. If you cannot afford to take a high risk with your portfolio, you must thoroughly examine the facts before investing.
- Your Investing Objectives
It is critical that as an investor, you should not invest based on herd mentality, but rather on your investment objectives. If you are a long-term investor, you should choose industries that will not become outdated in the long run, however, if you are looking for quick returns, a little tinkering with your stocks won’t harm.
Important Things To Keep In Mind
- Do Not Blindly Follow Popular Advice
No matter how reliable the source, never blindly adopt a stock marketing suggestion without first completing a comprehensive investigation on your own. Always choose stocks after conducting a thorough study and analysis of the performance of the company. While some recommendations might provide significant benefits, the incorrect ones can swiftly plunge you into danger.
- Remove Loser Stocks From The Portfolio
There is no certainty that a stock will rise after a significant decline. Know that it is critical to be realistic about what is achievable and what is impossible in the stock market. So, if you see that a stock in your portfolio is underperforming, admit your error and sell it right once to avoid more losses.
- Don’t Go Over Your Investment Budget Too Quickly
While long-term investments are far superior to other types of investments, you should not exceed your investment budget in hurry. Instead, set a predetermined sum and invest it in a variety of solid stocks. Rather than investing in just one stock, spread your funds evenly among several high-performing equities and shares.
Conclusion
The stock market has expanded significantly, which has led to the emergence of several sectors. The stock market sectors are essential because they simplify portfolio management for investors and investors. The sectors aid in putting the appropriate money in the appropriate portfolio. Additionally, it’s frequently suggested that investors diversify their portfolios to increase performance. Market segments, which include all businesses and industries, exist in India. Financial, healthcare, real estate, energy, consumer staples, and communications are just a few of the industries. The various sectors include a wide range of industries. Despite the nearly same growth rates across all industries, some have substantial returns. Healthcare, consumer staples, and information technology are the three top industries for investors, as the expanding tendency can be seen. The failure rate is lower, and the results are consistent. If properly understood and invested in, the stock market may provide a steady stream of income. Understanding the industries, doing your research, and choosing the best ones to invest in are all crucial.
FAQs
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How Many Different Market Sectors Are There?
There is no exact number, and this article’s stock market sector list is certainly not exhaustive. The number will undoubtedly increase. As new businesses emerge, the number of sectors cannot afford to remain constant.
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Which Industry Is Performing Well On The Indian Stock Market Currently?
As economic conditions are always shifting, there is no single industry that consistently performs well. According to this year’s investing cycle, infrastructure, banking, and power stocks are some of the most promising industries.
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What Is the GICS system?
GICS represents The Global Industry Classification Standard (GICS). The Worldwide Industry Classification System divides the global market into 11 sectors, 24 industry groupings, and about 69 industries.
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What Is A Sector Rotation Strategy?
Investors utilise sector rotation to hold overweight holdings in strong sectors and underweight positions in weak sectors. Exchange-traded funds (ETFs) that focus on particular industry sectors provide investors with a simple opportunity to participate in the rotation of an industrial sector.
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How Can I Select Stocks Based On The Sector?
You can discover the finest stocks inside the sectors that are driving the market higher during an uptrend. Investors can use different time frames within charts to find a trend before selecting a sector or stock. Determine the industries that are performing better than the entire market.
Interested in how we think about the markets?
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