Know the Economic Cycle (Very Simplified)

 Different sectors perform in different phases:

Market Phase	Strong Sectors
Early Bull	Auto, Realty, Banks, Metals
Mid Bull	IT, Consumption, Capital Goods
Late Bull	Pharma, FMCG (defensive)
Bear Start	Energy, Utilities
Deep Bear	FMCG, Pharma (safe sectors)

PHASE 1 – Early Bull Market (Recovery Phase)

Economy condition:

• Interest rates stabilizing

• Market recovers from the bottom

• Liquidity improves

Money flows into:

• Auto (consumer spending revives)

• Realty (home buying picks up)

• Banks / Financials (credit growth restarts)

• Metals / Infra (capex cycle begins)

Why?

Because these sectors benefit early when economy starts improving.

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⭐ PHASE 2 – Mid Bull Market (Growth Phase)

Economy condition:

• GDP growth strong

• Companies investing heavily

• Earnings growth accelerating

Leaders:

• Capital Goods / Infra

• Industrials

• IT

• Midcaps / Smallcaps

Why?

Because companies start expanding → higher orders → IT budgets increase → smallcaps rally fastest.

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⭐ PHASE 3 – Late Bull Market

Economy condition:

• Market overheated

• Valuations high

• Smart money becomes defensive

Leaders:

• FMCG (safe, steady demand)

• Pharma (defensive, stable earnings)

• Utilities / Power

Why?

Because when big investors expect a slowdown → they shift to stable, non-cyclical sectors.

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⭐ PHASE 4 – Bear Market Begins

Economy condition:

• Growth slows

• Risk-off sentiment

• FIIs exit risky sectors

Leaders:

• FMCG

• Pharma

• Energy

• Telecom

Why?

These sectors fall less when markets crash.

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⭐ PHASE 5 – Deep Bear / Bottoming Out

Economy condition:

• Panic selling ends

• Markets oversold

• Central bank begins cutting rates

Leaders:

• Banks

• Auto

• Realty

• Metals

Why?

These are the first to recover, and this starts Phase 1 again → cycle repeats.

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🎯 Simple Memory Trick (Super Useful)

✔ When economy is expanding → Cyclical sectors lead

Auto, Realty, Banks, Infra, Metals, PSU

✔ When economy is slowing → Defensive sectors lead

FMCG, Pharma, IT (partly), Utilities

This one line gives 80% accuracy in sector rotation reading.