Top 3 sectors to trade in according to analysts

Wondering where the research houses want their clients to put their money in? If you are a trader and looking to maximize your gains, we’ve got the 3 sectors you should be looking at.

In a market where liquidity is thin and catalysts are sector-specific, choosing the right sectors is half the battle. This year, three sectors stand out not just for their fundamentals — but for their tradeability: strong news flow, volatility, and room for sentiment-driven moves. Whether you’re positioning for swing trades or short-term momentum, these are the themes worth watching.

3. Auto Sector

Average EPS Growth: 28%

Sector outlook:

The auto sector is poised for a strong earnings rebound in FY26, with sector-wide profits expected to rise by 61% year-on-year to reach PKR 9.5 billion by the quarter ending June 2025. This growth is largely driven by a 17% YoY increase in vehicle sales, reflecting improved macroeconomic conditions, better consumer sentiment, and the easing of supply-side disruptions. The sector’s topline is projected to grow by 42% YoY to PKR 99.9 billion, highlighting the dual benefit of volume recovery and stable pricing.

Key players like INDU and SAZEW are already delivering strong earnings momentum, while HCAR is expected to post a sharp turnaround with a 146% jump in earnings.

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Supporting this earnings revival are improving margins and a favorable interest rate environment. Sector-wide gross margins are projected to rise to 15.7%, up from 12.4% last year, aided by declining international CRC/HRC prices and better cost absorption due to higher volumes.

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Moreover, finance costs are expected to fall sharply, down 71% YoY to PKR 105 million, as automakers deleverage and benefit from lower borrowing rates. With multiple tailwinds in place, FY26 is shaping up to be a revival year for the auto sector, particularly for companies with lean cost structures and strong product pipelines.

Earnings growth across the auto sector shows a mixed picture, with HCAR reporting a -21% decline in EPS, reflecting the lingering impact of supply chain issues, cost pressures, or a slowdown in unit sales. However, its FY26 outlook appears much brighter with an expected 146% surge in EPS, suggesting a potential turnaround, possibly driven by improved volumes or margin recovery.

In contrast, INDU and SAZEW are already delivering strong growth. INDU posted an 18% EPS increase and is forecast to grow by 20%, signaling stable performance and resilience in high-end vehicle demand. SAZEW stands out with 61% EPS growth, expected to continue with another 23% rise, reflecting strong operational execution and potentially favorable product mix.

These trends suggest a broader recovery in the auto sector heading into FY26, supported by easing import restrictions, better inventory flow, and stabilizing economic indicators. Both INDU and SAZEW are rated Buy, thanks to solid earnings visibility and relatively attractive forward valuations, especially with SAZEW trading at just 4.4x forward P/E. HCAR, while still rated Neutral, could see sentiment shift if its projected earnings rebound materializes. The sector overall appears to be turning a corner, but sustainability of growth will depend on interest rates, exchange rate stability, and consumer financing trends.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →