What Is Sector
An economic sector is a region where enterprises engage in the same type of activity, offer comparable goods and services, or both. Sectors are significant groups of businesses engaged in related commercial activity, such as agriculture and resource exploitation.
The marketplace is huge. For instance, 1900+ companies are listed on India’s National Stock Exchange (NSE). The 1900+ firms on the NSE are divided into 11 sectors.
The firms span a wide range of industries. Companies are categorized in the stock market according to the sectors in which they operate. Read ahead to learn more about the different sectors in stock markets with a special focus on the Indian equity space. Continue reading to find out more about the various stock market sectors, with an emphasis on the Indian equities market.
Sorting The Sector
So much information, but so little time. Before investing in a particular stock, investors have a difficult task ahead of them.
In a library, when you know which books are placed on which shelves, it makes things easier for you to walk over and choose a title that most serves your area of interest. Similar to how stocks become more approachable to investors when they are divided into sectors. As a result, the classification saves plenty of time.
On the same note, sectors assist warn investors about industries they would not want to park their money in. For example, during times of pandemic when air travel tends to be restricted, investors may want to refrain from tourism or aviation sectors.
How Many Sectors Are In the Stock Market?
A set of stocks with a lot in common, typically because they operate in comparable industries, is referred to as a stock market sector. According to the most used classification system, the Global Industry Classification Standard, there are 11 different stock market sectors (GICS).
In order to make it simple to compare businesses with comparable business concepts, we group stocks into sectors. It is also simpler to compare which stocks are making the greatest money when looking at sectors.
- Healthcare Sector
- Material Sector
- Real Estate Sector
- Consumer Staples Sector
- Consumer Discretionary Sector
- Utilities Sector
- Energy Sector
- Industrials Sector
- Consumer Services Sector
- Financials Sector
- Technology Sector
Healthcare Sector
There are two main parts of the healthcare sector. Companies that create medications and therapies based on biotechnology are one component, as are the supplies and equipment required for the clinical studies that are used to test those treatments. The other includes healthcare products and services such as medical diagnostic equipment, surgical supplies, and health insurance.
Large healthcare organizations include Pfizer and UnitedHealth Group (UNH) (PFE).
2. Materials Sector
Companies that offer a range of products for use in manufacturing and other applications are included in the materials industry. The materials industry includes companies that produce chemicals, building materials, containers, and packaging, as well as mining stocks and businesses that specialize in producing paper and forest products.
DuPont (DD) and The Sherwin-Williams Company are two of the biggest material firms in the world (SHW).
3. Real Estate Sector
Two distinct forms of investments in real estate are typically included in the real estate sector. Some companies in the industry are in charge of creating new real estate projects and managing them by finding tenants for different spaces on the project’s real estate. Also included in the real estate sector are the majority of real estate investment trusts, which are unique tax-favored business entities active in various facets of the real estate market.
Simon Property Group and American Tower Corp. (AMT) are two of the biggest real estate firms (SPG).
4.Consumer Staples Sector
Companies that manufacture domestic goods and personal products, as well as those that produce food, beverages, and tobacco, are included in the consumer staples category. Consumer staples is regarded as a defensive industry because these are products and services that customers require regardless of their present financial situation (i.e. recession-proof industries).
The biggest manufacturers of consumer goods are The Coca-Cola Company, Walmart (WMT), and Procter & Gamble (PG) (KO).
5.Utilities Sector
There are almost all utility companies you can imagine included in the utilities industry. Utilities that specialise in providing electrical power to residential and commercial clients as well as experts in the transmission and distribution of natural gas can be found within the sector. Customers’ water delivery is handled by other utilities. Some utilities work in more than one of these specialized fields. Even if they don’t exactly resemble the typical regulated utility in a deregulated period, independent power producers and renewable electricity also fall under the utility sector.
Some of the largest utility companies include NextEra Energy (NEE), Duke (DUK), and The Southern Company (SO).
7. Energy Sector
Companies that operate in the oil and natural gas industries fall within the energy sector. Along with manufacturers of other consumable fuels like coal and ethanol, it also includes corporations engaged in the exploration and production of oil and gas. The businesses that supply tools, supplies, and services to oil and gas producers are also considered to be part of the energy sector. Interestingly, though, it doesn’t contain many renewable energy businesses because they are categorized as utilities.
The energy sector includes some of the largest energy companies in the world, such as Exxon Mobil (XOM) and Chevron (CVX).
8. Industrials Sector
The industrials sector includes a diverse range of firms that typically make use of heavy machinery. The industrials sector includes businesses in the aerospace, defence, construction, and engineering sectors as well as transportation equities including railways, airlines, and logistics firms. This sector includes businesses that produce machinery, electrical equipment, and building materials, as well as several conglomerates.
Some of the largest industrial companies in the world include Boeing (BA), Honeywell (HON), and Union Pacific (UNP).
9. Communication Services Sector
The newest of the GICS sectors, the communication services sector, comprises a few significant areas that were formerly a part of other sectors. One arm of the industry is devoted to companies that offer telecommunication services, such as wireless telecom networks and companies that offer traditional landline services. The opposite end is occupied by media and entertainment businesses, which include both interactive media via the internet and more recent modes of communication as well as more traditional media like television and radio.
Examples of large communication services companies include Alphabet (GOOG) and Facebook (FB).
10. Financials Sector
Businesses with a focus on handling money are included in the financials industry. Banks are a significant industry group within the sector, but financials also includes brokerage firms, consumer finance companies, insurance companies, and real estate investment trusts with a focus on mortgages.
The financial sector includes some of the largest financial companies in the world like Visa (V), JPMorgan Chase (JPM), and Bank of America (BAC).
11. Technology Sector
Companies engaged in many types of technological innovation are included in the information technology sector. While some information technology businesses concentrate on developing software or offering services connected to putting technological ideas into practise, others are primarily involved in developing the tools, parts, and hardware that enable technology. Manufacturers of semiconductors and the machinery used to create semiconductor chips are also included in information technology.
The sector includes companies with some of the largest market capitalizations in the world, such as Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN).