Not Getting Returns Despite Markets Moving Upwards? Have You Invested in The Wrong Sector?
Published by Sharekhan Education | February 8, 2021
Not Getting Returns Despite Markets Moving Upwards? Have You Invested in The Wrong Sector?
Lost in the markets? Not able to beat the benchmark indices? Invested in a good blue chip stock, yet not getting desirable returns or returns equal to the index? Let us take an example, IT stocks like Infosys looked cheaper this year because the stock has already fallen by ~20% in 2016. So, you bought Infosys shares thinking it would rebound first if the markets accelerate.
| Until January 18, 2017 | YTD returns |
| Nifty | 2.6% |
| Automobiles | 5.5% |
| Metals & Mining | 11.1% |
| Banking | 5.6% |
| Information Technology | 1.6% |
| Pharmaceuticals | 2.4% |
| Cement | 8.1% |
| FMCG | 5.0% |
But, the reality turned out to be bitter! The Nifty advanced by 2.6% in 2017 until January 17 while Infosys fell by another 5% due to poor quarterly results. But, Infosys alone is not to blame, as the overall IT sector’s performance has been soft due to industry-wide issues. You can see in the chart above that the IT sector decreased by 1.6% while the Nifty rose by 2.6% during that same time. On the contrary, if an investor had invested in Metals & Mining sector shares or Cement stocks during the same time, he/she would have earned handsome returns of 11% and 8%, thereby outperforming the Nifty by a much higher margin.
What is the flavor of the Season? From which sectors are institutional investors withdrawing their money or making an entry? The answer to these questions will solve your perennial dilemma of beating/matching the performance of the benchmark index. It is not rocket science if one is given a proper guidance. If you would like to understand more about the basics of sector based investing, then register for one of our free “Power Money Workshops” and join our investment education program called “Stock Investor” to polish your investing skills. Remember “a fool and his money are soon parted“, So, invest wisely and in the correct sectors by acquiring the right knowledge and “make money from money till you die“.
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Happy reading…
