Recent times have seen advancements in various sectors at a faster than ever pace. These advancements often easing tasks that, otherwise, felt a bit daunting. With these developments, many new options have opened up for the previously tough-to-access-for-common-people stock market.
This unprecedented easy access to the stock market brings about a large number of new traders. And also, the risks of the stock market to these new traders. Thus, the new traders should make up some part of their time to understand the various sectors in the stock market.
What is Sector?
A sector, as its fundamental meaning indicates, is a group. And in the stock market, a group of companies that are a part of similar business operations. Let’s learn about some of the prime sectors in the stock market.
– Information Technology
– Fast Moving consumer goods
This sector comprises everything related to investments, finance and handling money. For example – commercial banks, insurance companies, non-banking financial companies, mutual funds and other small financial entities.
Since money is an integral part of everyone’s life, this is quite a sensitive sector. As a result, this sector accommodates many well-known established and mature firms and companies. SBI, Muthoot Finance, Axis Bank, Kotak Mahindra Bank are some household names in the finance or banking sector in stock market.
Energy sector in the stock market wraps up various companies that provide oil, gas and energy from other renewable resources like ethanol to the general public. Revenue generated by these companies often influences the price of natural oil, crude oil and related commodities. Thus, making it one of the major sectors.
Some major companies of the energy sector in stock market include Reliance Industries Limited, Power Grid Corporation of India, Oil & Natural Gas Corporation Ltd., NTPC Ltd., Bharat Petroleum Corp. Ltd.
I.T (Information Technology)
The booming sector of the century, I.T., shall be no surprise to anyone when included as an important sector in the stock market. This sector covers all the companies involved in the manufacturing of electronics, software development and relating services.
The pervasiveness of I.T. in almost all, if not all, industries due to its utility and flexibility makes it a closely watched sector. Leading companies of this sector in Indian stock market include Infosys, Wipro etc.
As social creatures, communication is one of the most fundamental things for any human. And hence, the communication sector cannot be not included in the list of major sectors. Companies associated with the operation of transmission of data through words, voice, audio and video or those that offer telecom equipment or related services come under the communication sector.
Being one of the fundamental things for being human, the investments in this sector are naturally huge. Some renowned telecommunication companies in this sector include Bharti Airtel, Vodafone Idea Ltd. and Jio.
Fast Moving consumer goods
This sector, which comes under essential services, includes the companies that produce packaged goods consumed within a short period. Responsible for compulsory items for maintaining daily lifestyle, the FMCG sector is the fourth largest sector in the Indian Economy.
Hindustan Unilever, Britannia Industries, Nestle, ITC are some of the companies that most consumers should’ve come across at least once.
With living in modern times being practically impossible without transportation in modern times, the automobile sector boasts of being one of the largest sectors in Indian Stock Market.
Firms involved in the development, design, manufacturing and selling of motor vehicles come under this sector. Some common examples of this sector are Maruti Suzuki, Tata Motors and Mahindra & Mahindra.
As an integral part of life, the Healthcare sector is pretty vast in stock market. This sector includes various pharmaceutical companies, hospitals, companies involved in manufacturing medical devices and related health services.
Lauded as the largest provider of vaccines, the Healthcare sector is quite a significant sector of the Indian Economy and stock market. Sun Pharmaceutical, Divi’s Laboratories, Cipla Ltd, Lupin are some major companies in this sector.
Material sector in the stock market, includes various companies responsible for providing goods for manufacturing and various other uses, for example, mining and chemical making companies.
Dealing with goods used for manufacturing other commodities, a lot of importance, along with investment, is placed in this sector.
Tata Steel, JSW Steel, Hindustan Zinc are some names of heavyweights in of materials sector in stock market.
Infrastructure is, irrefutably, the backbone of a country. Being the sector said to be the backbone of a country, it naturally is one of the integral sectors in the economy.
Companies involved in the development of bridges, dams, roads and other basic facilities need an immense amount of capital to operate. This makes it one of the major sectors in the stock market. Larsen & Toubro Infrastructure Development Projects Limited, GMR Infrastructure Limited, Adani Port, and Special Economic Zone Limited are well-known companies in this sector.
This sector consists of companies involved in various segments such as television, printing and films.
Being involved in providing information and entertainment to the general public, this sector is backed with quite a good amount of funds. Zee Entertainment Enterprises, Sun TV Network, PVR Ltd are some well-known enterprises in this sector.
Understanding the segregation of the various sectors in Indian stock market, a trader can better understand the flow of money in the market. By bifurcating the sector in stocks, the task of judging the right portfolio to invest in at the point of time according to the market trends and the global situation becomes easier.
Although every sector is equally important, each one can have a varying return. The growth of each sector can also slightly vary according to the demands of society. Thus, it is vital to understand the different sectors in the stock market before investing to ensure that you choose the best sector in the stock market and the most profitable investment.
A better understanding and thorough research are often the separator between successful and unsuccessful traders.
Global Industry Classification Standard commonly used for sector breakdown reporting divides market sectors into eleven categories namely: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Telecommunication Services, Utilities, Real Estate.
Specific circumstances of a recession usually affect which all sectors do well. Historically, the most consistent sectors to do well during a recession are the ones where demand is inelastic to changes in prices and incomes like healthcare, freight and logistics and the food sector.
During a recession, a consumer’s income is reduced. Thus, there is a need to cut all the expenses that can be avoided. Fulfilling this need, sectors like discount retailers, DIY and repairs also see a rise during this time.
As the world deals with the pandemic, very low, if none, industries remain unaffected. Due to the needs, the most well-to-do industries in this period are I.T. and Pharmaceuticals. In the path of recovery, the previously worst-hit sector, restaurants and tourism, are speculated to make a recovery along with the chemical sector as the world looks for a new chemical market.
As the world moves on to the path of recovery, Infrastructure, Travel and Tourism, Artificial Intelligence, Biotech and Genomics are a few sectors that are speculated to grow as the need of the hour. As the recuperating society, having seen the pandemic, would be unwilling to have it repeated, the above-mentioned sectors are speculated to see a good inflow of investment in future.
A lot of factors cause volatility. The most common among them are trader emotions. As political unrest, famines, drought, depressions, inflation, deflation and other fluctuation take their laps around randomly, some stocks become more volatile than others. Some sectors that have shown the highest volatility in recent times are Energy (in oil prices), Financial, I.T. and Healthcare.