📈 Positional · Rotation
Sectoral analysis
Rank sectors by relative strength (Bank Nifty vs Nifty, IT vs Nifty). Buy the leading sector's top constituents; short the laggards. Rotate quarterly as leadership shifts.
Setup
- Compare each sector index (Bank Nifty, IT, Auto, Pharma, FMCG, Metal, Realty) vs Nifty on a 3-month ratio chart
- Rising ratio = sector outperforming Nifty; falling ratio = underperforming
- Rank sectors monthly by their 3-month relative strength — the top 2 are your candidate longs, bottom 2 are shorts
Entry
Long: buy 2-3 top-weighted constituents of the leading sector on a pullback to their weekly 20 EMA. Short: mirror on the weakest sector.
Exit
Rebalance monthly. If a sector's relative strength drops below rank 3, close longs in it. If it climbs to top 2, open longs. Sector rotation is a monthly discipline, not a one-time trade.
Stop-loss
On individual stock legs: below the pullback low. On the sector rotation itself: if the sector's relative-strength ratio falls decisively (e.g., 10% weakening in a month), rotate out immediately.
When it works
- Clear sectoral leadership persists for 2-3 months minimum
- Broad market direction supports the top sectors (bull market with banks leading, etc.)
- You can maintain the monthly rebalancing discipline
When it fails
- Very brief sector rotations (2-3 weeks) — you're always chasing the last month's winner
- Bear-market regime where all sectors fall — relative strength alone doesn't protect
- Individual stock idiosyncratic events overriding the sector thesis
General trading rules that apply
Regardless of the specific setup, these apply to every strategy on this site:
- Never risk more than 2% of your account on a single trade
- Place a hard stop-loss before entering — no exceptions
- Journal every trade: setup, reason, outcome, one lesson
- After two consecutive losses, stop for the session
- Backtest and paper-trade for a month before deploying real capital
Every strategy here is part of our in-house catalogue, written and calibrated for Indian markets. Past behavior does not guarantee future results. Charts run against 2-year Nifty data — actual results in your account will vary. Backtest, paper-trade, and size responsibly before risking real capital.