If you are already associated with the investment in the share market in any way, then you must be aware of the concept of the different stock market sectors classified in the stock market as well. There are different types of stocks in the share market based on the market cap, returns etc. Stocks are also divided into different sectors based on the services the companies are engaged in.
what are Stock Market Sectors?
A stock market sector is nothing but a group of stocks which are common to each other in terms of their services to the market. So, we can also say that one sector will have all those companies in the group which are almost similar to each other in operations and services they are offering. There are 11 different stock market sectors, according to the most commonly used classification system: The Global Industry Classification Standard (GICS) has divided the stocks operating in any market globally into 11 different stock market sectors, but each market can have its different sector classifications. For example, the Indian stock market has divided all stocks listed on it into more than 11 sectors.
By categorizing into sectors, it becomes easy for an investor to identify the companies which all are engaged in the same business model. So, it makes a comparison of performance easy for an investor as well. In this way, you and I as an investor can make a decision to invest in stock by comparing the stock with its peers in the same sector.
Types of stock market sectors
The majority of the stock markets have categorized their stocks into 12 sectors and the process of stock market works under close supervision of Security Exchange Board of India (SEBI). The types of sectors in the stock Indian Stock Market are as follows:
- Energy Sector
- Metals or Materials
- Banking and Finance
- Consumer Services
- Real Estate
An energy sector is a group of companies which are engaged in the business of supply and distribution of energy. The companies which are associated with energy production in any way will be clubbed in the energy sector only. For example, there are thermal energy, hydro energy, solar energy and nuclear energy. So the companies which are in the operations of R&D, production, supply or servicing of energy producing resources or its related business will be clubbed in this energy sector. Oil and natural gas exploration, production of thermal and Hydro energy, solar energy and related industries are part of this sector. IOCL, ONGC, and Reliance are some of the examples of energy sector companies.
Metals or materials
Companies which are engaged in the exploration, production, and servicing of any type of metal and its related business will be classified into this sector. Metals may be of different kinds but all the metals are grouped into one category. Such industries are into the operation of mining the metal from the ores, its purification, forging the metals and shaping the metals into a useful ones for the market segment. It can include construction material, packaging things and many more under its purview. Vedanta, JSW and Tata steel are some of the examples of this sector.
Engineering or industrial sector
This sector has a wide arena with the companies involved in the engineering or industrial business encompassed into it. It can include the companies which are making heavy engineering equipment or in the business of providing services with heavy works such as KEI industries, L&T and BHEL etc. Companies in the aerospace, defence, construction, and engineering industries can be listed in this sector. And some big companies in this business of manufacturing electrical equipment, machinery are included in it. Normally big conglomerates are found to be engaged in such heavy work, but in the Indian stock market, the conglomerate is another sub-sector divided.
Automotive or Automobile Sector
As the name suggests, here all the companies in this sector will be engaged in the making of automobiles or related accessories. Industries which are into the Production of vehicles, Spare parts, and accessories like tyres, lights, glasses, plastics, seats, and music systems fall into this sector. Tata motors, Hero, Maruti Suzuki, and Bajaj motors are some of the leading examples of this sector.
Banking and Finances
This sector includes all the organizations which are in the service sector and are mainly providing services of banking and finance-related things to its consumers. Banks are the main component of this sector but some of the secondary leaders in this sector are insurance, finance industry and investment bankers and brokerage firms. Groww, Zerodha, HDFC Bank, and LIC are some of the examples of these sector stocks.
Stocks under this category are in the business of providing their services in the field of Production, Research, designing and servicing of consumer products. Consumer products are further divided into two categories in the Indian stock market that are Consumer Durables and Consumer Non-durables. Bajaj, Bluestar, Dabur and HUL are examples of consumer sector of stocks.
Healthcare and Pharmacy sector
This sector includes the stocks of the agencies involved or related to the healthcare sector. Healthcare industries are providing services which are in any way used to improve the health of the customers like health insurance, medical diagnostic tools production and supply. The pharmacy sector mainly has companies which are making medicines and accessories to be used by healthcare professionals. Zydus, Cipla, and Apollo are examples of these sectors.
Telecom or communication sector
As its name suggests, companies in this sector are providing communication services to their consumers. Networks may include the internet, Mobile network service, wireless services, and high-frequency communication. Some of the stock markets in foreign also include media services in this sector but the Indian share market divides them into other dedicated sectors. Airtel and Reliance Jio are examples of communication sector stocks.
Technology or IT sector
This sector covers the companies engaged in technological innovation and providing IT-related services. These companies develop software based on the demands of their consumers and also provide technical solutions for the same. Some companies are engaged in making the hardware and offering services for that software as well. Companies in the business of IT and related services like manufacturing computers, chipsets, motherboards, hardware, and memory chips are included in this sector. Wipro and HCL are the best examples of this sector.
Real Estate Sector
Real estate by its name clears the mind of everybody that these companies are into the business related to land. But the real estate companies are also of two types, one which is engaged in financing the real estate projects and locating tenants. While another one is the one which itself is completing the entire project from scratch like procurement of land, erection of the building, searching for occupants, financing the process etc. Omaxe and Shriram properties are examples of this sector.
Companies which are engaged in the services industries are clubbed into this sector. Services may include the Hotel industry, tourism industry, shipping, agro, Transport and logistics, trading, hospitals and many more. PC jewellers, Bluedart and Easemytrip are examples of this stock sector.
As its name says, companies which are in the business of making the products used in construction activity come under this category. Construction-related activity may include the production of cement, bars, concrete, marbles etc. Ambuja Cement, Reliance infra and Unitech are examples of this sector.
There are so many sectors in which stocks are segregated, but you can invest in any of the stocks individually. But by looking at the sector you can forecast the demand of the particular stock by comparing it with its competitors in the same sector. Accordingly, you can enter or exit the trade and book your profit; hence by looking at the sector you can maximize your profits if all data is read correctly.