Sector Analysis: Definition, Framework, Factors, How to do it

Sector analysis is a vital tool for investors and companies to evaluate different segments of the economy and identify opportunities for outperformance. It involves analyzing entire industries and economic sectors to determine growth trends, competitive landscapes, and prospects relative to the overall market. 

Sector analysis paves way for filtering better performing companies. This way short term traders target trading into these specific stocks which has chances of providing better returns in neartime. 

Conducting thorough sector analysis allows investors to tilt their portfolios towards areas with strong potential and helps businesses make strategic decisions. Analysts examine both qualitative factors such as economic conditions, regulations and demographic shifts, as well as quantitative metrics like historical financial performance and valuation ratios. The goal is to pinpoint sectors that are well-positioned for expansion based on their positioning in the business cycle and macroeconomic environment. 

Key approaches to sector analysis include top-down frameworks focusing on macro trends and sector rotation strategies targeting industries in early growth phases. Comprehensive evaluation of sectors guides investment decisions and capital allocation to maximize returns over full market cycles.

Based on studies carried out by ‘NASSCOM Strategic Review 2021’ and ‘McKinsey & Company: The Rise Of India’s IT Sector 2020’; it was found that the IT Sector of the country has been an important contributor for the country’s GDP and employment. It consistently outperformed other major and minor sectors. During the research, it was found that supportive government policies and skilled workers managed to evolve and boost the IT sector. An important insight was learnt through the papers that during the decade of 2010 and 2020; Nifty IT managed to outperform the Nifty 50 by growing approximately 7% annually. 

What is sector analysis?

Sector analysis is the process of evaluating different sectors of the economy to determine their performance and outlook. Sector Analysis involves analyzing entire industries and sectors rather than individual companies. The goal is to identify sectors that are likely to outperform the overall market, as well as those that sometimes underperform. 

To conduct sector analysis, analysts examine both qualitative and quantitative factors. Qualitative factors include economic, regulatory, and demographic trends that impact a sector. Quantitative analysis looks at historical financial performance and valuation metrics. Analysts also evaluate the sector’s position in the business cycle. Sectors in the early stages of expansion often offer the most potential. Sector analysis aims to identify the sectors best positioned for growth, allowing investors to tilt their portfolios towards areas of strength in the economy. It provides a macro perspective on the markets rather than just looking at individual stock fundamentals.

Sector analysis is crucial for optimizing the performance of a portfolio. A study called ‘Sector Analysis And Portfolio Optimization In The Indian Stock Market’ was carried out and published by ‘Journal Of Asset Management’. The findings concluded that just by embracing sector analysis during the build up of the investment portfolio, the portfolio incurred an increase in return on investment by the margin of 2 – 3 % annually and the risk reduced by 1 – 2 % compared to non sectoral portfolios. 

How does sector analysis work?

Sector analysis works by examining different sectors of the economy, such as technology or healthcare, and determining which sectors are likely to outperform or underperform the market during different stages of the business cycle, allowing investors to adjust their portfolios accordingly.

By analyzing different sectors, investors identify industries and companies that are poised to outperform or underperform the broader market based on where we are in the business cycle.

Different sectors perform differently in various market environments. Sector analysis if incorporated in numerous investment strategies has found to be beneficial for the investment portfolio. A Study was carried out by Indian Institute of Management (IIM) Research Paper Series, the papers revealed that, by choosing high performing sectors for example IT and Pharmaceuticals generated a 12-15% higher return over a period of 5 years than the traditional diversified market approach investment strategy.

The business cycle refers to the cyclical expansions and contractions of economic activity. The cycle consists of four main phases – expansion, peak, contraction, and trough.  During the expansion phase, economic activity accelerates as production and demand increase. This leads to strong growth in GDP, falling unemployment, and rising corporate profits. The peak marks the transition point between expansion and contraction. Economic activity hits its maximum sustainable level at the peak before beginning to slow down. 

The contraction phase consists of declining economic activity as production, demand, and corporate profits begin to fall. GDP growth turns negative, unemployment rises, and the economy enters recession. Finally, the trough marks the end of the contraction when economic activity hits its lowest point before starting to recover again.

Economies of countries undergo phases of recessions. A study was carried out, named as ‘A Comparative Study of Sectoral Performance During Economic Recession in India’ by an organization called ‘Economical and Political Weekly’. The papers published reflected that during the recession phase of India, the Reality Sector experienced declines upto 25% whereas the FMCG Sector managed to decline only upto 5%. This is how sector analysis assist in controlling portfolio drawdowns by studying sector analysis during critical times of economy. 

What is the objective of sector analysis?

The main objective of sector analysis is to help businesses or investors make informed decisions by providing insights into market demand, competition, opportunities, threats, and trends in order to devise strategies that capitalize on strengths while addressing weaknesses. There are eight key goals of performing sector analysis. 

At its core, sector analysis guides critical business and investment choices by providing insights into industry dynamics. Investors leverage sector research to identify promising areas to allocate capital based on growth prospects. It also steers stock selection by revealing well-positioned companies. For businesses, sector insights direct high-level strategic decisions on new market entry, partnerships, competitor responses, and resource allocation. 

Analysing sectors allows investors and companies to map out the competitive landscape. Researching companies within a sector helps pinpoint direct and indirect competitors. This is critical for evaluating relative competitive positioning and strengths vs. weaknesses. For investors, competitive analysis highlights which companies are poised to outperform.  More granular competitor analysis enables assessing the relative strengths and weaknesses of companies in a sector. For instance, benchmarking financials, market share, branding, operational efficiency, and other differentiators between rivals. These insights help forecast which competitors are most threatening or which are vulnerable.

Thorough research into sector conditions helps build projections for demand and supply trajectories. By analyzing macro factors like consumer spending, costs, regulations, and technological changes, investors and firms forecast future demand and supply. This guides decisions on which sectors or companies to focus on.

Macroeconomic factors have potential to impact the performance of sectoral indices. A study put forward by Journal of Economic Policy and Research published that a percentage of change in interest rate led to a 2.5% change in the banking sector whereas this 1% change in interest rate led to only 1.8% change in the reality sector. 

What are the types of sector analysis?

There are two main types of sector analysis used in stock marketing – the top down approach and the sector rotation approach.

1. Top down approach

The top down approach is one of the main methods used in sector analysis for stock marketing. This method takes a macro view of the overall economy and markets to determine which sectors are likely to outperform. The goal is to identify the best sectors to invest in based on current economic conditions and future projections. 

The first step is to analyze the broad macroeconomic environment, when using a top down sector analysis approach for stocks. This includes looking at leading indicators such as GDP growth, inflation, interest rates, employment rates, manufacturing activity, and consumer sentiment. The analyst will assess the current state of the economy and where they believe it is headed in the near future. Strong economic growth typically benefits cyclical sectors such as technology, consumer discretionary, financials, industrials and materials. Meanwhile, weaker growth tends to favor defensive sectors like healthcare, consumer staples, and utilities. 

Beyond macroeconomics, top down analysis also considers the phase of the business cycle the economy is in. Early cycle phases tend to favor cyclical stocks as the economy recovers from recession. Mid-cycle phases benefit a mix of cyclicals and defensive stocks as the recovery matures. Late cycle phases favor defensive stocks as growth moderates ahead of the next recession. Understanding the business cycle is key to positioning sectors properly.

Top down analysts will also evaluate fiscal and monetary policy since government spending, taxes, and central bank actions all impact the economy and markets. For example, fiscal stimulus and lower interest rates tend to boost cyclical sectors, while austerity measures and tighter monetary policy tend to favor defensive sectors.

At the market level, top down analysis looks at the relative performance between stocks, bonds and cash. Stocks outperforming suggest a prevailing risk-on sentiment, benefiting cyclical sectors. Strong bond performance indicates risk-off sentiment which tends to favor defensive stocks. 

Beyond macroeconomics and markets, top down analysis also looks at trends by sector and industry. The goal is to identify sectors with superior growth prospects, earnings momentum, valuations, and price performance. This analysis points to sectors that are best positioned competitively regardless of the macro environment. For example, sectors undergoing technological disruption and innovation often outperform even in weaker economies.

Top down research draws from a variety of macro data sources and research reports. Key sources include the Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve, Conference Board, purchasing manager indexes, Corporate Earnings Outlooks, and proprietary bank research. 

The top down analysis yields a sector framework for equity investments based on macro trends, the business cycle, fiscal and monetary policy, market performance, and sector dynamics, when it is completed. Institutional investors begin their equity strategy with a top down sector framework as the foundation before selecting individual stocks.

A top down approach offers key benefits in sector analysis for stock marketing. It provides a big picture view of markets based on objective data. This technique avoids subjective biases that arise from focusing only on bottom up company-specific details. The macro focus allows investors to tilt their portfolios towards favored sectors during different parts of the business cycle. Dynamic sector allocations based on top down research potentially enhance portfolio returns over time.

The top down approach also has limitations. Sector investing based on macro trends will lag on fast-changing conditions. There is still room for subjectivity based on one’s macro outlook. It also provides little input on selecting specific stocks within favored sectors. Risks are mitigated by combining top down sector analysis with bottom up stock analysis. 

2. Sector rotation approach

The sector rotation approach is another key method used in sector analysis for stock marketing. This tactical approach involves shifting investment holdings between different sectors and asset classes to take advantage of the business cycle. The goal is to rotate into sectors that are early in their expansionary phase and poised to outperform the broader market.

A sector rotation strategy recognizes that sector performance is cyclical in nature. As economic expansion matures, early cycle sectors like technology, industrials and materials will eventually underperform. Meanwhile, defensive sectors like utilities, healthcare and consumer staples tend to take leadership. By rotating between sector categories at different stages of the cycle, investors aim to enhance returns.

The typical sector rotation framework divides the eleven stock market sectors into three categories – early cyclicals, late cyclicals, and defensives. Early cyclical groups include technology, materials, industrials, and consumer discretionary. Late cyclical sectors are energy, financials, and real estate. The defensive sectors are utilities, consumer staples, telecom, and healthcare.

Investors rotate their stock holdings counter-clockwise through these three stages. Early cycle recovery phases favor early cyclicals. Mid-cycle expansionary phases benefit late cyclicals. Late cycle slowdown phases warrant increased exposure to defensive sectors. This rotation aims to capture sector leadership as the business cycle evolves.

A sector rotation strategy relies heavily on economic indicators to gauge the phase of the business cycle. Important indicators include GDP growth, yield curve, inflation, consumer sentiment, employment data, and housing starts. The strategy involves increasing exposure to early cyclicals when growth is accelerating out of recession. As the expansion matures, positions rotate from early to late cyclicals. In the late cycle, defenses take precedence to protect against impending recession. 

In addition to economic data, sector rotation analysis incorporates earnings momentum and relative price strength. Sectors delivering upside earnings surprises and stronger technical momentum often sustain outperformance. These stock selection factors are integrated along with macro cycle analysis.

Investors utilize a variety of tactics to implement a sector rotation strategy. This includes overweighting favored sectors, underweighting or avoiding lagging groups, and shifting between cyclical and defensive stocks. Exchange-traded funds across sectors offer an efficient vehicle to execute rotations. Individual stocks are also used, focusing on sectors with the most positive momentum.

As with any dynamic investment strategy, sector rotation requires actively monitoring macro, fundamental, and technical trends. Frequent rotation must be balanced against trading costs. Rotating too often leads to churn without meaningful gains. Allowing cycles to substantively evolve reduces turnover.

A sector rotation approach aims to enhance portfolio returns over a full market cycle. However, the strategy has limitations also. Predicting economic turns is challenging, leading to potential mistiming of rotations. Sectors diverge from typical cyclical patterns. Moreover, major bull and bear trends that overrides normal rotational leadership. Despite flaws, simulated evidence still suggests rotation incrementally boosts performance.

Indian Journal of Finance published a study called ‘Sector Rotation Strategy: An Analysis of Indian Stock Market’. The study observed that by implementing sector rotation strategy, the portfolio improved returns of over 3-5% annually compared to a static portfolio strategy.

What are the factors of sectoral analysis?

Key factors in sector analysis include PESTLE elements like politics, economics, society, technology, law, and environment as well as size, age, focus, substitutes, and other forces shaping industry competition and attractiveness.

PESTLE framework

The PESTLE analysis evaluates the overall macro-environment surrounding a sector to assess its investment potential. It specifically looks at political, economic, social, technological, legal and environmental factors. This top-down perspective provides crucial context on the external forces that influence industry performance. Equity analysts leverage PESTLE analysis to determine which sectors are best positioned given the current operating backdrop. 

Political Factors

The political environment has major ramifications on sector and industry prospects. Analysts assess political stability, policies, and regulatory changes that impact competitiveness. Key areas include tax policy, trade policy, government spending, election cycles, and regulatory bodies. For example, increased infrastructure spending would benefit engineering, construction and raw materials sectors. Meanwhile, stricter environmental regulations hurt fossil fuel-related sectors. 

Economic Factors 

The overall health of the economy is a critical driver of equity sector performance. Analysts thoroughly assess economic indicators including GDP growth, inflation, interest rates, credit conditions, currency values, disposable income levels, and unemployment rates. Times of strong economic expansion support cyclical sectors like industrials, financials and consumer discretionary. However, weak growth tends to favor defensive sectors including healthcare and consumer staples. 

Social Factors

Shifting social and cultural trends significantly impacts sector prospects. Demographic changes, wealth distribution, educational attainment, and attitudes drive consumer demand patterns. Generational differences also affect preferences. Population growth rates by age segments determine future labor force capacity. Understanding societal changes allows determining which sectors align best with emerging structural shifts.

Technological Factors 

The pace of technological change and innovation is rapidly transforming industries. Sectors on the leading edge of technology like software, semiconductors, and internet services tend to see stronger growth. At the same time, sectors disrupted by technology face competitive threats. Adoption rates of new technologies like artificial intelligence, process automation, autonomous vehicles, renewable energy and biotech influence sector winners and losers. Tracking technological catalysts and risks is a key driver of equity sector performance.

Legal Factors

The legal and regulatory environment creates operating constraints and risks for companies across sectors. Analysts evaluate new legislation, existing laws and pending legal issues relevant to each sector. Stringent regulations, penalties for non-compliance, and litigation risks negatively impact impacted sectors. In contrast, relaxed oversight and business-friendly legal reforms favor certain industries. The legal landscape determines the competitive leeway and costs for players in a sector.

Environmental Factors 

With rising ecological awareness and climate change risks, environmental factors significantly sway sector prospects. Stricter regulations on emissions, natural resource usage, and sustainability practices raise costs for heavy polluters. Sectors like fossil fuels and manufacturing face headwinds. Meanwhile, sectors supporting energy efficiency, renewables, recycling, and organic products benefit from the “green” trend. Environmental analysis informs sector positioning strategies.

Size Factors 

A sector’s sheer size and growth trajectory influence its investment potential. Larger sectors make up a greater share of stock indices and the overall economy. Analysts focus on total revenue, market capitalization, and growth rates. Large, rapidly growing sectors like technology see sizable inflows from institutional investors. Stable large-cap sectors also attract significant assets. However, small niche sectors with surging growth outperforms despite lower size.

Age Factors

A sector’s place within its life cycle affects its outlook and risk-return profile. Rapidly emerging new sectors in the introduction phase like biotech and internet companies in the 1990s offer huge upside but also high volatility. Mature sectors like utilities in the stagnant phase tend to underperform with lower volatility. Cyclical sectors rise and fall. Identifying a sector’s lifespan position provides perspective on expected returns.

Focus Factors

The breadth of a sector’s focus impacts the investment landscape. Highly diversified sectors like healthcare span industries from pharma to insurers to hospitals. This diversification reduces risk. Meanwhile, very concentrated niche sectors like precious metals are vulnerable to commodity swings. Wider reach supports stability while narrow concentration increases binary risks. 

Substitute Factors

The threat of substitute products or services affects a sector’s durability. Traditional media sectors like print and broadcast have been disrupted by digital substitutes. The auto sector faces substitutes like public transit. Banking faces fintech substitutes. Analysts examine how easily sector offerings are replaced or outdated. High substitutability increases risk. But unique value propositions with no close substitute offer protection.

By analyzing these key factors systematically, investors are able to evaluate sector attractiveness and risks. The top-down perspective complements bottom-up stock analysis for comprehensive equity research. An informed sector view allows tailoring portfolios towards favored macro environments.

How to do sector analysis of a stock?

Sector analysis of a stock involves examining the technical and fundamental metrics of key competitors of the stock within the same sector. This study evaluates the performance of the stock and its peers to provide an insight of better performers. 

Strike.money is one of a kind platform that provides a comprehensive feature known as ‘Peer Comparison’ that evaluates all the major metrics of stocks and its peers in a graphical and tabular format as shown in the image below. 

For understanding how a sector analysis is carried, we will examine the stock; Bajaj Auto.
Sector analysis for Bajaj Auto involves examining the two-wheeler industry outlook, competitive landscape, growth drivers, risks, government policies, economic environment, input costs and company strategy to evaluate its investment potential.

The first step is to identify the broad sector that the company belongs to. Bajaj Auto is an automobile manufacturer in India. It operates in the automobile sector, specifically in the two-wheeler and three-wheeler segment.

The second step includes the analysis of the competitive landscape within the Automobile segment.

The image uploaded below highlights the technical measures of Bajaj-Auto and its peers within the Automobile sector. 

The image uploaded above reflects the fundamental variables of Bajaj-Auto and its peers.
The graphical representation provides an easy method to visually observe the trend of various ratios. The platform offers the opportunity to observe and study the metrics over a span of 10 years. 

The image uploaded above reflects the price performance of Bajaj-Auto and its peers performing within the same sector of the Automobile sector. The graphical representation of the price performance provides a method of studying the metric and data subtly. 

This is how sector analysis of a stock is carried out using Peer Comparison feature of strike.money.

The government’s policies and regulations also significantly impact automobile sector growth. Analyse the key policies around emission norms, electric vehicles, taxation including GST rates, incentives for new factories etc. The Indian government has announced favourable policies like the FAME scheme which promotes adoption of electric vehicles. Higher rural incomes and infrastructure spending are also conducive for sector growth. However, higher GST rates on automobiles have negatively impacted demand in the past.

How to know if a particular sector is doing well?

Reviewing industry research, benchmarking performance, examining historical trends, analysing future demand drivers, and considering qualitative sentiment are used to identify sectors with strong growth prospects across analytic dimensions. Selecting stocks in industries that are expanding provides greater potential for returns compared to stagnant or declining sectors. 

Take advantage of already-published industry research from reliable sources rather than beginning from scratch. Organizations like consulting firms, investment banks, and industry associations frequently publish detailed reports analyzing market trends, opportunities, risks, and forecasts. 

Where to find sector analysis reports?

Sector analysis reports are obtained from research houses like CRISIL, brokerage reports, industry bodies like IBEF, and financial news platforms like Bloomberg Quint. 

CRISIL is India’s leading rating agency and is known for its unbiased research. It publishes insightful sectoral analysis reports covering major industries including automobiles, banking, infrastructure, IT, pharmaceuticals, textiles etc. These reports analyse growth trends, government policies, demand-supply dynamics, competitive landscape, industry forecasts and investment outlook.

As these reports objectively assess opportunities and challenges for players in a sector, they help investors make informed stock picking decisions. For example, an investor looking to invest in banking stocks which refers to CRISIL’s Banking Sector in India report to understand key drivers, challenges and performance metrics of major banks before deciding which bank stocks to buy.

Equity research teams of leading stock brokerages also regularly publish sector analysis reports for their client investors. These provide a detailed view of market leaders, growth expectations, financial ratios, risks and potential triggers for a sector. Brokerage reports sometimes also give stock recommendations, which investors refer to while building their portfolio.

For instance, a brokerage’s Pharma Sector Update report could provide insights on regulatory changes, pricing pressures, USFDA actions, new drug launches and research progress of major Indian pharma companies. Comparing these details across companies guides investors to pick the better-performing stocks.

Industry associations like IBEF, CII, Assocham etc also publish insightful sector reports. For example, IBEF’s automotive industry report provides macroeconomic trends, policy support, growth drivers, segment-wise outlook, major players’ profiles and developments. As IBEF partners the government to promote investment in India, its sector analysis provides an independent overview of opportunities. It does not recommend specific stocks, so investors need to assess company-specific aspects before deciding on investments. 

For continual updates across sectors, platforms like Bloomberg Quint (BQ Prime) offer a wealth of data, news and analysis to guide stock investing. Their sector-specific tracker provides real-time updates, news developments, corporate results analysis and expert opinion on sectoral trends. Alongside such sector analysis, BQ Prime also provides stock screening tools, price charts, financial data and valuation models to enable smart stock picking.

What are the tools for doing sector-wise stock analysis?

Major brokerage research reports and financial websites provide overview of sectors and recommend top stocks. However, for on-the-go analysis, Strike is very useful. Strike is a powerful stock analysis tool that allows users to filter stocks by sector, track rankings and monitor price movements.

Analysts find Strike convenient as it helps dig deeper into sectors on the go and make well-informed investment decisions by comparing stocks across sectors. Analytical tools are used for finding high probability trading opportunities and strike’s feature of peer comparison assist users in selecting better performing stocks performing business in the similar sector.

What are the different types of sectors in the stock market?

The National Stock Exchange has 16 different types of sectoral indices. The companies or stocks that operate within a specific sector are grouped together to constitute a sectoral index. 

These sectoral indices provide a benchmark value or data reflecting the average performance of the listed stocks under a specific sector. This illustrated value of different sectors is useful in comparing the performance of various sectors with each other. Investors and traders further watch, observe and find opportunities within these indices and stocks based on typical fundamental or technical analysis. 

Sr no.	Name of the sectoral index	Constituents (Listed based on Weightage)
1.	Nifty Auto	M&M, Maruti, TataMotors, Bajaj Auto, Heromotoco, EicherMot, TVSmotor, Bharatforg, Motherson, AshokLey, Tatamtrdvr, Bosch Ltd, MRF, Balkrisind,  Exideind, Apollotyre. (Total 16)
2.	Nifty Bank	HDFCBank, ICICIbank, AxisBank, SBIN, KotakBank, IndusindBank, BankBaroda, PNB, FederalBank, AUBank, IDFCFirstB, BandhanBank. (Total 12)
3.	Nifty Financial Services	HDFCBank, ICICI BANK, AxisB, SBIN, KotakB, BajFinance, BajajFinsv, PFC, Rec Ltd, Shriram Fin, SBILIFE, ICICIGI, HDFCLife, CholaFin, HDFCAmc, Lichsgfin, ICICIpruli, SBIcard, IDFC, Muthootfin (Total 20)
4.	Nifty Financial Services 25/50	HDFCBank, ICICI BANK, AxisB, PFC, SBIN, REC Ltd, Shriram Fin, BajFinance, Kotakbank, Bajfinsv, SBILife, HDFCLife, Cholafin, ICICIGI, HDFC AMC, ICICIPruli, SBICARD, Lichsgfin, Muthootfin, IDFC. (Total 20)
5.	Nifty FMCG	ITC, Hindunilvr, Nestleind, VBL, Tataconsum, Britannia, Godrejcp, Colpal, Dabur, United spirit, Marico, PGHH, UBL, Radico, Balramchi. (Total 15)
6.	Nifty Healthcare	Sunpharma, Cipla, Dr reddy, Apollo Hosp, Max health, Divislab, Lupin, Auropharma, Zydus Life, Torntpharm, Alkem, Glenmark, Laurus Lab, Ipcalab, Biocon, Abbotindia, Syngene, Lalpathlab, granules, Metropolis. (Total 20)
7.	Nifty IT	INFY, TCS, Tech M, HLC Tech, Wipro, LTIM, Persistent, Coforge, Mphasis, LTTS. (Total 10)
8.	Nifty Media	ZEEL, PVRNOX, Suntv, Saregama, TV18Brdcst, Nazara, Dishtv, Network18, Tipsindltd, Hathway. (Total 10)
9.	Nifty Metal	Tatasteel, Hindalco, Adanient, JSWsteel, VEDL, Jindalstel, NMDC, Aplapollo, JSL, SAIL, Hindzinc, Nationalum, Hindcoppr, Ratnamani, Welcorp. (Total 15)
10.	Nifty Pharma	Sunpharma, Cipla, Dr reddy, Divislab, Lupin, Auropharma, Auropharma, Zyduslife, Alkem, Glenmark, Mankind, Lauruslabs, IPCAlab, Abbotindia, Biocon, Gland, Sanofi, JBchempharm, Narcopharm, granules. (Total 20)
11.	Nifty Private Bank	HDFCBank, ICICIBank, AxisBank, IndusindB, KotakB, Federal Bank, IDFCFirstB, BandhanB, RBLBank, CUB. (Total 10)
12.	Nifty PSU Bank	SBIN, BankBaroda, Canbk, PNB, UnionBk, IndianB, BankIndia, MahaBk, IOB, Central Bank, UCO bank, PSB
13.	Nifty Energy	Reliance, NTPC, Powergrid, Coal india, ONGC, Tatapower, Adani green energy, BPCL, IOC, Adani Energy (Total 10)
14.	Nifty Reality	DLF, Lodha, GodrejProp, Phoenixltd, Prestige, Oberoirlty, Brigade, Sobha, Mahlife, Sunteck (Total 10)
15.	Nifty Consumer Durables	Titan, Havells, Dixon, Voltas, Crompton, Bluestarco, Kajariacer, Kalyanijil, Vguard, Whirlpool, Cera, Rajeshexpo, Centuryply (Total 13)
16.	Nifty Oil and Gas	Reliance, ONGC, IOC, GAIL, BPCL, ATGL, Hindpetro, IGL, GSPL, Castrolind, Gujgasltd, Aegischem. (Total 12)

Which sector is in demand in India?

As India is bullish for even foreign investors, there are multiple sectors which are showing strength depending on conditions and seasons.

The information technology sector continues to see strong demand and growth in India, with IT stocks consistently outperforming the broader market. Healthcare and pharmaceuticals is another sector that has seen increased investment and focus, as India aims to improve access to quality healthcare and become a global hub for generic drug manufacturing. Consumer stocks in areas like retail, banking and auto have upside potential given India’s large and growing middle class. The renewable energy sector is also attracting attention and investments, as India looks to meet its ambitious targets for solar and wind power generation capacity. 

What are the differences between sector and industry analysis?

Sector analysis examines broad categories of the economy like technology or healthcare while industry analysis looks at more specific groups within those sectors such as software companies or biotech firms. Sector analysis studies stocks at a macro level and provides a broad overview of the opportunities and risks prevalent in a business sector.

For example, analysing the banking sector covers trends affecting banks, NBFCs, insurance companies, lending institutions etc. Industry analysis on the other hand, evaluates stocks at a more micro level focusing deeply on dynamics influencing a specific industry within that sector. For instance, public sector bank industry analysis covers only PSU bank stocks.

Sector analysis encompasses stocks across diverse industries that are interlinked under a broad sector. For example, energy sector analysis spans oil & gas, power, renewable energy and coal industries. Industry analysis only covers stocks of companies engaged in that particular industry. For instance, analysis of the two-wheeler industry only focuses on two-wheeler manufacturers.

How sector analysis impacts fundamental analysis?

Sector analysis looks at the performance and prospects of entire industries, while fundamental analysis evaluates individual stocks. By understanding industry trends and dynamics, sector analysis provides useful context for interpreting the financial data of companies.

For example, knowing an industry is in decline changes the interpretation of a company’s dropping sales. Similarly, an industry growing rapidly makes a stock seem attractive despite weaknesses in its fundamentals. Incorporating sector analysis alongside traditional fundamental metrics gives a more complete picture of forces impacting a stock’s value and performance.