In the recent past, all sectors have ended in the green on the back of fast-moving consumer goods (FMCGs), energy, and metal stocks, along with public-sector (PSU) banks.
So, what exactly are sectors in the stock market? A stock sector is a collection of publicly-traded companies that are engaged in similar lines of business. The stocks in each sector, in turn, are known to have similar characteristics.
For example, there are about 1,900-plus companies listed on the National Stock Exchange (NSE) and 11 sectors into which the shares listed can be suitably classified.
In the Indian context, there are a plethora of investment opportunities across various sectors, which include agriculture and allied, auto components, automobile, aviation, banking, financial services and insurance (BFSI), biotechnology, capital goods, chemicals, construction, defence manufacturing, electronic system, fisheries and aquaculture, food processing, FMCG, healthcare, information technology-business process management (IT-BPM), leather, media, medical devices, metal mining, oil and gas, paper and packaging, pharmaceuticals, ports and shipping, railways, renewable energy, retail and e-commerce, roads and highways, telecom, textiles and apparels, thermal power, and tourism and hospitality.
In short, sectors tend to group several stocks based on similar business models, thus allowing investors to zero in on a particular industry and identify a particular stock.
To select a stock before investing, an investor needs to consider the company’s price-to-earnings (P/E) ratio, earnings per share (EPS), debt-to-equity (D/E) ratio, and related factors. They need to understand the relevant product or service benefits.
Further, an investor is required to evaluate the stock performance and future growth possibilities. It is crucial to remain focused on a company’s current financial condition to ensure better returns in the long run.
Moreover, an investor shouldn’t be influenced by popular advice. An investment in a particular stock sector should be based on one’s own risk appetite and holding period
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
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