Sector analysis thus gives an idea of how well a group of companies in a particular sector are going to perform as a whole. This assessment helps investors to make investment decisions and reap potential benefits. The idea behind this is the stock of companies will rise or fall in accordance with the performance of the sector.
Examples of some sectors are energy, healthcare, technology, financial service, consumer services, automobile, insurance, hospitality, tourism, retail, manufacturing, pharmaceutical etc.
There are two strategies where-in investors use sector analysis:
• Top down Investing: Investor get the sector analysis done and invests in sectors performing best and chooses some stocks, next he moves down and chooses stock from company not performing so well and so on to complete his portfolio
• Sector rotation: Investor gets the sector analysis done and predicts the cyclic nature of stock up and stock down. This way he gets an idea which sectors might surge in upcoming months. Investors invests in stocks which have high potential for rise in near future