Sector Rotation is an active investment strategy in which investors shift capital from one industry sector to another in anticipation of the next phase of an economic cycle. For instance, investors might move from defensive sectors (FMCG, pharmaceuticals) during a slowdown to cyclical sectors (industrials, financials, consumer discretionary) as the economy begins to recover. Understanding sector rotation requires a strong grasp of macroeconomic cycles and their differential impact on various industries—a strategy often employed by mutual fund managers and seasoned equity investors.
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