In the stock markets, sectors refer to an industry or a theme that you can invest in. When you find a sector or theme attractive, you can either invest in stocks in the sector or you can invest in the index futures assuming that they are liquid enough. Let us understand some popular sectors themes in the stock market.
Popular sectors or industry groups in the stock markets
Sectors refer to industry groupings which is a similar set of products. Here are some key sectors.
Cement – These sector manufactures cement by crushing limestone and also make concrete. This is a capital-intensive industry. Some of the key players in the industry are Ultratech, ACC, Ambuja Cements, Shree Cements, and India Cements etc.
Banking – This sector refers to the public sector banks and the private sector banks that are listed and are basically into the business of deposits and lending. Popular listed banks include SBI, HDFC Bank, ICICI Bank, Kotak Bank, Axis Bank, Bank of Baroda, and PNB etc.
Information Technology – This is the sector that operates in the field of software and IT related services. Their biggest markets are based in the US. Some well-known listed IT companies include Infosys, TCS, Wipro, HCL Tech etc.
Pharmaceuticals – This is the sector that producers generic drugs and formulation and also offers testing and laboratory facilities. This is R&D intensive. Some popular listed names are Sun Pharma, Lupin Pharma, Biocon, Dr. Reddy Labs, and Cipla etc.
Automobiles – This sector has grown substantially in the last few years and has emerged as a significant component of the Nifty. It includes passenger cars, trucks and two wheelers. Some popular listed names are Tata Motors, Maruti, Hero Moto, Bajaj and Eicher.
Metals – This is a fairly broad classification and includes the manufacturers of steel, copper, aluminium, zinc etc. These are commodities. Some popular names include Tata Steel, JSW Steel, SAIL, Hindalco, Vedanta etc.
FMCG – Fast Moving Consumer Goods is a very broad classification and includes segments like food products, toiletries, detergents etc. Some of the popular names in the FMCG space are Hindustan Unilever, ITC, Britannia, Marico, Dabur etc.
Hydrocarbons – This is another sector that has become an important part of capital markets after disinvestment. It includes oil extractors like ONGC, Refiners like IOCL, Markets like BPCL & HPCL as well as gas plays like GAIL, Petronet LNG and IGL.
Diversified Companies – Finally, there are companies that are substantially diversified with exposure to a wide array of industries. Such names like Larsen & Toubro and Grasim are examples of diversified conglomerates.
There are also some themes, apart from sectors
Themes are slightly different from sectors in the sense that themes can include a number of industry groups under one broad theme. Here are some popular themes:
Rate Sensitives – Rate sensitive includes a set of industries that are sensitive to rate changes. For example, when interest rates are hiked, then these rate sensitives tend to lose. Some of the popular sectors that fall under the rate sensitive theme are banking, NBFCs, realty companies and two wheelers.
Commodities – Commodities are a much wider theme and include metals, alloys, mining companies, oil extractors, agri commodity companies, gold miners etc. The idea is that these commodities are all driven purely by the forces of demand and supply and there is nothing much to differentiate these commodities.
Consumer discretionary – This is again a much broader theme. It includes all the sectors that benefit from greater consumer spending, especially where there is greater spending discretion available. This theme can encompass food products, FMCG products, consumer durables, white goods, airlines etc.
MNCs – This is a theme that plays entirely on multinational corporations that have a stake in their Indian arm. Most of them are strong on brand value. Some examples include stocks like Hindustan Unilever, United Spirits, and Colgate India etc.