Stocks are categorised into sectors based on the business focus and industry.
Usually, based on the broader market and macroeconomic conditions, some sectors out-perform the others and therefore it is advisable to identify the sectors whose outlook is good in the current market conditions.
You should diversify by identifying more than one sector, and within a sector, by selecting more than one stock to invest. An ideal equity portfolio would have 8-10 carefully selected stocks.
It is also important to track market developments and keep shuffling the portfolio based on changes in the market conditions.
Source: Economic Times