Banking, IT, auto, pharma, FMCG and metals lead at different points of the cycle. How to track leadership objectively.
Key takeaways
- Relative strength versus Nifty is the simplest objective rotation measure.
- Rate cycles, the rupee and commodity prices drive most Indian sector leadership.
- Trade the strongest stocks in the strongest sectors, not the cheapest in the weakest.
Sector rotation is the tendency of money to move between industries as expectations change. In India the recurring drivers are the interest-rate cycle for banks and financials, the rupee and global tech spending for IT, commodity prices for metals and paints, and monsoon and rural demand for FMCG and tractors.
You do not need a macro forecast to trade it. Compute each sector index's return relative to Nifty over one and three months, rank them, and update weekly. Leadership is visible in the data well before it is obvious in the news.
Then trade inside the leaders. Within a strong sector, prefer the stocks making new relative highs over the laggards 'catching up'. Catching-up trades feel cheaper and underperform consistently.
Watch for rotation exhaustion: when a sector's leadership becomes the dominant market narrative, the easy part is usually over. The ranking table will show the roll before commentary does.
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