Sectors and sectoral indices in NSE

 

Sectors are typically considered to be a broad classification. Within each sector, numerous sub-sectors and industries can also be further delineated. The Global Industry Classification Standard also known as GICS is the primary financial industry standard for defining sector classifications.

 

The Global Industry Classification Standard was developed by index providers MSCI and Standard and Poor’s. Its hierarchy begins with 11 sectors which can be further delineated to 24 industry groups, 68 industries, and 157 sub-industries. It follows a coding system which assigns a code from each grouping to every company publicly traded in the market. The GICS coding system is integrated throughout the industry allowing for detailed reporting and stock screening through financial technology.

 

The 11 broad GICS sectors commonly used for sector breakdown reporting include the following:

 

Energy

Materials

Industrials

Consumer Discretionary

Consumer Staples

Health Care

Financials

Information Technology

Telecommunication Services

Utilities

Real Estate

 

Following are the sectoral indices in NSE.  

Nifty Auto Index

Nifty Bank Index

Nifty Consumer Durables Index

Nifty Financial Services Index

Nifty Financial Services 25/50 Index

Nifty FMCG Index

Nifty IT Index

Nifty Media Index

Nifty Metal Index

Nifty Oil & Gas Index

Nifty Pharma Index

Nifty Private Bank Index

Nifty PSU Bank Index

Nifty Realty Index

 

All sectors are linked with economy but there are few sectors which are coupled to the economy while few which also perform well in bad economy. If the financial condition of the country is weakened, then Banking and Finance sector is affected e.g. The financial crises of 2008. In times of economic downtime, Auto sector is affected and does not perform as sales of auto is impacted during downturn of economy e.g. The COVID-19 situation of 2020. Consumer durable sector performs when economy is healthy and looking for growth prospects. In a healthy economy all sectors perform but when there is a recession or lag in economic growth, few sectors do not perform depending on the situation. The pharma sector is performing currently with the down turn of economy. PSU banks sector is in bad shape since a long time as the banking reforms in this sector has not pleased the investors. Oil and Gas sector performs when Global economy is in peak and demand of oil is high and prices are rising. Media sector depends on the performance of the media and is usually dependent on the growth of the media house. Metal is usually a gloomy sector and performs with difficulty. In times of bad economy, it is in bad shape and when economy is stable it generates results on investment but investment results are usually moderate. IT sector has turn out to be an evergreen sector with its performance in COVID-19 times. FMCG is usually a stable sector and depends on the demand in the economy which usually does not go below or above a certain point.

 

https://www1.nseindia.com/products/content/equities/indices/sectoral_indices.htm

https://www.zeebiz.com/market/sectors-nse

https://www.investopedia.com/terms/s/sector-breakdown.asp

How to pick a stock?

Here are the things an investor should consider when picking stocks:

1.       Earnings growth

2.       Stability

3.       Relative strength in industry

4.       Debt-equity ratio

5.       Price-earnings ratio

6.       Management

7.       Dividends

Here are the essential steps (or checklist) that you need to follow for picking winning stocks to invest in Indian stock market:

1.       Does the company have good fundamentals?

a.       Earnings Per Share (EPS) – Increasing for last 5 years

b.       Price to Earnings Ratio (P/E) – Low compared to companies in the same industry

c.       Price to Book Ratio (P/B) – Low compared companies in the same industry

d.       Debt to Equity Ratio – Should be less than 1 (Preferably debt<0.5 or Zero-Debt)

e.       Return on Equity (ROE) – Should be greater than 20%

f.        Price to Sales Ratio (P/S) – Smaller value is preferred

g.       Current Ratio – Should be greater than 1

h.       Dividend – Increasing for the last 5 years

2.       Do you understand the products or services offered by the company?

3.       Will people still be using this product or service in 15-20 years from now?

4.       Does the company have a low-cost durable competitive advantage?

For example, Colgate! It has become such a common name in Indian homes that Colgate is considered as a synonym to toothpaste. Another example is Cadbury– the chocolate producing company. This company is dominating its industry and the people are even ready to pay a lot more to buy its products. Similarly, Tata Motors has got a moat in ‘truck’ sector. Tata Trucks has been in dominating in the Indian automobile sector for the last 5 decades.

5.       What is the company doing that its competitors are not?

To understand better, let us analyze the Indian automobile sector. There are a number of automobile companies in India. However, when we consider the passenger vehicles (Cars and SUVs), Maruti Suzuki is the leading company in India. There are a number of competitors against Maruti in this sector like Tata Motors, Hyundai, Honda, Ford etc.

Nevertheless, Maruti Suzuki is dominating because of the easily available service centers that it provides. Maruti’s service center can be found on every corner of the streets. It’s really simple and easy to get a Maruti car serviced even in small cities. On the other hand, try to get your ‘FORD’ car serviced. You will rarely find any authentic ford service center around you. That’s why people prefer buying Maruti cars in India.  And hence, Maruti Suzuki is able to increase its sales consistently and give good returns to its shareholders.

6.       Does the company have a big debt?

7.       Is the company’s management efficient and qualified?

8.       Is the company constantly in the news and overly popular?

 

https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/slideshows/how-to-pick-stocks-7-things-you-should-know?slide=9

 

https://tradebrains.in/how-to-select-a-stock-to-invest-in-indian-stock-market/