The shifting of investor capital from one sector to another as the economic cycle or market narrative changes.
Different sectors tend to lead at different points in an economic or market cycle — for example, IT and export-oriented sectors often benefit from a weaker rupee and strong global demand, while rate-sensitive sectors like banking, real estate, and auto tend to respond directly to RBI policy moves. Sector rotation is the observable pattern of institutional money moving between these groups as the macro backdrop shifts.
Tracking which sectors are gaining relative strength (and which are losing it) is often a more useful signal than the headline index move alone, since it tells you what story the market is actually pricing in.