What is Sector?
Sector is a generalized division in an economy. An economy can be broken down into about a dozen sectors, which can describe nearly all of the business activity in that economy. In other words, a sector is one of a few general segments in the economy within which a large group of companies can be categorized.
What is Industry?
The term industry refers to a group of companies that produce the same product. This is a sub-category that comes under sectors. As we discussed earlier, sectors divide companies that produce products that belong to the same field. That does not say that all companies under a sector provide the same product. In order to classify companies that produce the same products, we divide each of the sectors into industries.
For example, the financial sector can be broken down into several different industries such as banks, asset management companies (AMC’s), insurance companies, brokerages, credit unions, credit-card companies, accountancy companies, consumer-finance companies, investment funds, etc.
Stock Market Sectors
The stock market is often divided into 11 major sectors representing key areas of the economy. When investing, you can choose from stocks within the sectors that interest you.
At a glance, the 11 stock market sectors under the GICS(Global Industry Classification Standard) are as follows below.
- Consumer Discretionary
- Consumer Staples
- Information Technology
- Communication Services
- Real Estate
The energy sector consists of businesses that source, drill, extract, and refine the raw commodities we need to keep the country going, such as oil and gas. Major energy stocks include BPCL, CASTROL INDIA, GAIL, Chennai Petro, HPCL, IOC and MRPL.
The energy sector contains two industries:
- Energy Equipment & Services Industry
- Oil, Gas & Consumable Fuels Industry
The materials sector includes companies that provide various goods for use in manufacturing and other applications. The materials sector consists of mining, refining, chemical, forestry and related companies that are focused on discovering and developing raw materials.
The material sector contains five industries:
- Chemicals Industry
- Construction Materials Industry
- Containers & Packaging Industry
- Metals & Mining Industry
- Paper & Forest Products Industry
The industrial sector comprises railroads and airlines to military weapons and industrial conglomerates.
The industrial sector contains fourteen industries:
- Aerospace & Defense Industry
- Air Freight & Logistics Industry
- Airlines Industry
- Building Products Industry
- Commercial Services & Supplies Industry
- Construction & Engineering Industry
- Electrical Equipment Industry
- Industrial Conglomerates Industry
- Machinery Industry
- Marine Industry
- Professional Services Industry
- Road & Rail Industry
- Trading Companies & Distributors Industry
- Transportation Infrastructure Industry
The utilities sector encompasses just about every different type of utility company you can think of. Within the sector, you’ll find utilities specializing in making electrical power available to residential and commercial customers, as well as specialists in natural gas transmission and distribution. Other utilities are responsible for delivering water to customers. Some utility companies engage in more than one of these different sub-specialties. In addition, independent producers of power and renewable electricity also land in the utilities sector, even though they don’t exactly resemble the traditional regulated utility in an era of deregulation.
The utilities sector is made up of five industries:
- Electric Utilities Industry
- Gas Utilities Industry
- Independent Power and Renewable Electricity Producers Industry
- Multi-Utilities Industry
- Water Utilities Industry
The healthcare sector has two primary components. One component includes companies that develop pharmaceuticals and treatments based on biotechnology, as well as the analytical tools and supplies needed for the clinical trials that test those treatments. The other encompasses healthcare equipment and services, including surgical supplies, medical diagnostic tools, and health insurance.
The health care sector contains six industries:
- Biotechnology Industry
- Health Care Equipment & Supplies Industry
- Health Care Providers & Services Industry
- Health Care Technology Industry
- Life Sciences Tools & Services Industry
- Pharmaceuticals Industry
The financials sector includes businesses that are primarily related to handling money. Banks are a key industry group within the sector, but you’ll also find insurance companies, brokerage houses, consumer finance providers, and mortgage-related real estate investment trusts among financials.
The financial sector contains seven industries:
- Banking Industry
- Capital Markets Industry
- Consumer Finance Industry
- Diversified Financial Services Industry
- Insurance Industry
- Mortgage Real Estate Investment Trusts (REITs) Industry
- Thrifts & Mortgage Finance Industry
Consumer Discretionary Sector
The consumer discretionary sector consists of businesses that have demand that rises and falls based on general economic conditions. Products in this sector include everything from washers and dryers to sporting goods to new cars to diamond engagement rings and more.
The consumer discretionary sector contains 11 industries:
- Automobile Components Industry
- Automobiles Industry
- Distributors Industry
- Diversified Consumer Services Industry
- Hotels, Restaurants & Leisure Industry
- Household Durables Industry
- Leisure Products Industry
- Multiline Retail Industry
- Specialty Retail Industry
- Textile, Apparel & Luxury Goods Industry
- Internet & Direct Marketing
Consumer Staples Sector
The consumer staples sector consists of businesses that sell the necessities of life, ranging from bleach and laundry detergent to toothpaste and packaged food.
The consumer staples sector contains six industries
- Beverages Industry
- Food & Staples Retailing Industry
- Food Products Industry
- Household Products Industry
- Personal Products Industry
- Tobacco Industry
Information Technology Sector
The information technology sector covers companies involved in the different categories of technological innovation. Some companies in information technology focus on creating software or providing services related to implementing technological solutions, while others are more involved in building the equipment, components, and hardware that make tech possible. Information technology also includes makers of semiconductors and the’’ equipment used to produce semiconductor chips.
The information technology sector contains six industries:
- Communications Equipment Industry
- Electronic Equipment, Instruments & Components Industry
- IT Services Industry
- Semiconductors & Semiconductor Equipment Industry
- Software Industry
- Technology Hardware, Storage & Peripherals Industry
Communication Services Sector
The communication services sector includes a couple of major areas that used to be part of other sectors. Telecommunication services providers, including both wireless telecom networks and providers of old-style landline services, make up one wing of the sector. At the other end are media and entertainment companies, including both older media like television and radio and interactive media via the internet and newer forms of communication.
The communication services sector is made up of five industries:
- Diversified Telecommunication Services
- Wireless Telecommunication Services
- Interactive Media & Services
Real Estate Sector
The real estate sector generally includes two different types of investments related to real estate. Some stocks in the sector are responsible for developing new real estate projects and then managing them by obtaining tenants for various spaces within the project property. In addition, most real estate investment trusts, which are special tax-favored business entities that operate in various areas of the real estate industry, get counted as within the real estate sector.
The Real Estate sector is made up of two industries:
- Equity Real Estate Investment Trusts
- Real Estate Management & Development
Sector Market Investing
Stocks tend to follow the performance of their respective sector, in addition to the overall stock market. Keeping abreast of the market can make it easier to determine when a stock that belongs to a particular sector has bottomed out. If you are interested in a certain sector but are not ready to invest in a specific company within that sector, you can still participate in sector investing! Seek out lower-risk investments like ETFs and mutual funds that are specifically tied to a sector. Sector investing plays an increasingly important role in the strategies that we as investors use today.