Sector Rotation is an important feature of movement of share prices in stock exchanges. The stock prices of a particular sector tend to rise in tandem in certain periods of time. It may however be mentioned that all the stocks of a particular sector may not go up or down simultaneously. It may be that one or two stocks of a particular sector go up while the other stocks of the sector do not act positively on the same day. Such stocks may go up the next day or thereafter and in this way the sector as a whole rises. Likewise when the sector moves downward all the stocks of the sector do not fall simultaneously. One or two stocks may tend to rise up depending upon various factors including recent financial results, announcement of expansion plan, demerger and other positive action announced by the company relating to the particular stock. This upward and downward movement of sectors may last for one or two weeks or more. Since almost all the sectors rise or fall by turn it would be worthwhile to purchase stocks of companies that are undergoing a period of correction and sell them when their upward movement is set up  Some of the sectors in which the companies are categorised are : Cement, Power, Infrastructure, Metals and mining, IT, Automobile, Bankand financial institutions, Engineering and capital goods, FMCG etc. 

This is to mention that within the sector there are differences which may be noted. For example, in the infrastructure sector there are different companies with different business portfolios. Some are in real estate development business, some in road construction and some others in construction and operation of airports and shipyards etc. Similarly, in capital goods sectors different companies produce different goods and equipment such as electrical goods, tools and machinery and some other construction equipment etc. In selecting stocks of companies of a particular sector  it has to be ensured to which group it belongs and which group is in up move. The alternate rise or fall of stock prices of a particular group/sector creates ample opportunities for investment and trading. In May 2024, we saw a good run of companies belonging to the engineering and capital goods sector. There are several companies that have jumped 20-30% in a short span of time. It has happened that all the companies of this sector have not moved up in all the days but some companies have moved up first followed by others of the same sector. Companies like Bharat Forge, BEL, Hindustan Aeronautics, Bharat Dynamics, Cummins, Siemens, ABB etc. have all moved up during this time. Similarly infrastructure companies like NCC, IRCON, IRB etc have staged a strong up move. Larsen & Toubro, the engineering and infrastructure giant, the late mover is likely to move up further from its present price of ₹3658 (as on 28th May 2024).

We may now consider which sector(s) may have the fair chance of up move next. Notwithstanding the onset of the rainy season cement sector companies which are moving presently sideways for a considerable period of time may see up move in their stock prices.The cement sector is very important for the economic development of the country and has close relation with infrastructure development. Of the several companies in this sector mention may be made of JK Lakshmi, Ultratech and ACC which may gain more than others. JK Lakshmi presently quoting at ₹798(as on 28.5.2024) has considerably improved its margin of profit during the last two quarters. In the last quarter ending March 2024 its consolidated net profit rose to ₹162/- against ₹114 in the quarter ending 2023 although total revenues  are lower. The company has announced plans to double its capacity by 2030. The stock has a potential upside of 30 to 35% in the medium term. Similarly Ultra tech and ACC which have performed very well in the last quarter  are likely to be good picks. JK cement and Shree Cement are also expected to move up. However the cement and infra companies may face some challenges if the result of the Parliamentary election is disappointing.

Besides cement, the metal companies, especially the nonferrous metals look good. Although the prices of metal companies have increased in the recent past there is a fair chance of further increase as the price of aluminium, zinc and copper are on the rise in the international market. Consequently the prospect of Hindalco, Nalco has significantly improved. Moreover both the companies have declared excellent quarterly results(4th quarter, 2024). Again, the stocks are likely to be least impacted if the outcome of the parliament election 2024 disappoints. The companies are trading at ₹682/- and ₹191/- as on 28.5.24 respectively. Vedanta which is priced at ₹455/- (28.5.24) is also a good bet considering the rise of non ferrous metal prices and its demerger into six companies which has made significant headway.