In the stock market, a sector refers to a group of companies that operate in the same industry or share similar business activities. Sectors are used to categorise stocks for better analysis, comparison, and investment strategy. Common sectors include technology, healthcare, financials, energy, consumer goods, and industrials, among others. Each sector reacts differently to economic conditions—for example, technology stocks may thrive during innovation booms, while utilities remain stable due to consistent demand. Investors use sector analysis to diversify their portfolios, reducing risk by spreading investments across different industries. Sector performance can also indicate broader economic trends; for instance, a strong energy sector may suggest rising oil prices, while weak consumer spending could signal a downturn. Sector-specific ETFs and mutual funds allow traders to invest in entire industries rather than individual stocks. Additionally, cyclical sectors (like travel and luxury goods) perform well during economic expansions, while defensive sectors (like healthcare and utilities) remain resilient during recessions. By understanding sectors, investors can make informed decisions, capitalise on growth opportunities, and hedge against market volatility. Sector rotation strategies, shifting investments between sectors based on economic cycles, are also popular for maximising returns in changing market conditions.