• Version
• Download 18
• File Size 380.90 KB
• File Count 1
• Create Date 9 April 2025
• Last Updated 9 April 2025

Title: Market Trends and Portfolio Diversification: A Sector-Based Analysis

Author: Rohith Koushik D C
Affiliation: CMS Business School, JAIN (Deemed-to-be University), Bengaluru
Email: rohithkaushik01@gmail.com

Abstract: This study examines the usefulness of sector-based portfolio diversification in the Indian stock market, focusing on five important sectors: Information Technology (IT), Fast Moving Consumer Goods (FMCG), Banking, Automobiles, and Pharmaceuticals. The analysis compares the sectoral indices of these five sectors to the NIFTY 100 index from 2005 to 2024, using monthly closing prices. Furthermore, five leading companies from each sector (25 in total) were chosen, and their individual performances were compared to the NIFTY 100. Using quantitative financial metrics such as Descriptive Statistics, CAGR, Beta, Sharpe Ratio, Value at Risk (VaR), Correlation heat maps, and ARIMA forecasting, the study finds that FMCG and Pharma are low-volatile, they are considered as defensive investment options, whereas Banking and Automobiles are more volatile, but have high-growth potential. TCS, HDFC Bank, Sun Pharma, ITC and Maruti Suzuki emerged as consistently strong performers within their respective sectors. The findings emphasize the value of comparing both sectoral and company-level performance with broader market indices, using historical monthly price data, to inform strategic portfolio allocation and risk mitigation for institutional and retail investors.

Keywords: Portfolio diversification, risk-return analysis, sectoral trends, regression, forecasting, investment strategies.