What is sectoral rotation?

Sectoral rotation refers to the movement of money from one industrial sector to another based on sectoral and macroeconomic factors. For instance, during an economic boom, investors may prefer to invest in sectors such as banking and metals, which tend to outperform the overall markets. Similarly, in a downturn, banks are typically the worst affected, and investors may choose to move money out of banks to sectors such as FMCG or pharma, which have relatively stable demand. To benefit from sectoral rotation, investors need to develop a good understanding of economic and market cycles.


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