Sectoral Analysis of Indian Stock Market – Top Sectors for Investment


Which sectors are worth putting your money into!

The recent drop in NIFTY, triggered due to panic in the US stock market lead to erosion of an exorbitant amount of investor wealth. Factors such as global oil prices, foreign forces, India’s macroeconomics, all have a very sharp and deep effect on our volatile stock market. However, this impact is not uniform across all sectors. Some sectors are comparatively more resilient to exogenous shocks as compared to others. It is investment in these stocks that may lead to profits in the long run.


Sectoral analysis in stock market is a technique to assess the economic and financial condition of a share of a company in a particular sector. It is mostly used by investors who use a top-down or sector rotation approach in investing.

In the current scenario where the market is on the cliff’s edge and the crowd is in a panic mode due to the ILFS fiasco, rising oil prices and falling rupee, there is fear. Majority of people would sell everything and stay away from the market.

As a smart investor, you shouldn’t be worried about what the crowd thinks. Some stocks fall just because other stocks are falling too. Researching about various sectors of industry and fundamentals of its companies can help in putting money in the right place. The key is to find those companies with long term durable moats. ‘Moats’ in business means a competitive advantage a firm has got which hinders other firms from entering that particular sector.


Indian energy sector is freshly mushrooming with wide potential to expand. We import over 80% of our oil needs, with plans to cut reliance on foreign oil by 10% by 2022. This will open gates for foreign investing into our energy sector worth $300 billion over the next decade. Wind, hydro and solar energy sector are still at a rudimentary level, thus offering a huge scope for growth in the long term.

Indian government’s vision towards efficient, sustainable and secured energy access along with focus on energy infrastructure, LNG terminals, new pipelines and offshore gas development projects have made it a reliable source for investing.

Some people might question, that rise in crude oil price may put a dent on the performance of Indian oil companies. But this is only in the short term. Once Iran-US sanctions kick-in and India structurally shifts its imports to other countries, things will start to normalize.

Tata Power Co Ltd, Reliance Infrastructure Ltd and Hindustan Petroleum Corp Ltd have been top gainers in the stock market recently. Nifty Energy Sector Index – which includes 10 companies belonging to petroleum, gas and power sector listed on the ‘National Stock Exchange of India’ (NSE) – has provided 20% returns in its one-year performance as compared to other sector indices.


FMCG is the 4th largest sector in the Indian economy. The key drivers for the growth of the sector are changing lifestyles, increasing disposable income levels, low per capita consumption and growth of rural sector. Rising GDP will increase demand for consumer goods with the younger generation being the major consumers.

With the advent of e-commerce sites, accessibility to such goods has increased. Number of online users in India is likely to cross 850 million by 2025.

In terms of market share, Food & Beverages is the leading segment, followed by Household and Personal Care. Retail market in India is estimated to reach $1.1 trillion by 2020, which will boost the revenues of FMCG companies.

With increasing awareness around natural products, people are gracefully embracing Ayurveda products. FMCG giant Patanjali Ayurveda registered a 111% growth with a turnover of Rs 10,561 crore in financial year 2016-17.

Nifty FMCG index – comprises of 15 stocks of FMCG sector listed on the NSE. The top gainers include Hindustan Unilever Ltd, ITC and Dabur.

The FMCG sector holds a promising future ahead with its increasing necessity and inelasticity.


The above sectors with a strong growth path are expected to be the best for investment for the next 10 years.

In a non-trending phase such as the present where you can’t anticipate the next roll-out of the market i.e. whether there will be an uptrend or a downtrend, it is best to sit back and do a little research. Your aim should be to diversify your portfolio to minimize losses. As Warren Buffett has rightly – “Price is what you pay, value is what you get”.

Author | Deepti Kansal