Do you study the four stages before selecting your best sector to invest?

The importance of industry analysis is slowly dawning on the Indian investor as never before.Previously, investors purchased shares of companies without concerning themselves about the industry it operated in.It worked then as India was a seller’s market but now there’s immense competition that’s coming in so it becomes important for you to have the basics right before you take a step.

Cycle: The first step in industry analysis is to determine the cycle it is in, or the stage of maturity of the industry. As it gives you a better picture of what you can expect from it.
Nascent Stage: At the first stage, the industry is new and it can take some time for it to properly establish itself. In these early days, it may actually make losses or profits. At this time there may also not be many companies in the industry so it becomes very important to do a detailed study.
Growth Stage: Once the industry has established itself it enters a growth stage. As the industry grows, many new companies enter the industry. At this stage, investors can get high reward at low risk since demand outstrips supply.
Maturity Stage: After the halcyon days of growth, an industry matures and stabilizes. Rewards are low and so too is the risk. Growth is moderate. Though sales may increase, they do so at a slower rate than before. Products are more standardized and less innovative and there are several competitors.

Source: Rediff