Forecasting Future Trends: An LSTM Approach to Identifying High Growth Sectors

Predicting trends in the financial stock market is a challenging task for researchers due to its complex and dynamic nature. The stock market has always been complex due to the market’s volatility and non-linearity. Accurate forecasting is difficult, and forecasting errors can result in significant investment risks, even with techniques like diffusion modelling and forecasting. Understanding the pattern of the sector price of the particular company by predicting its financial growth and future development will be highly beneficial. This study optimizes a predictive machine learning model based on long-short term memory (LSTM) neural networks to predict the most performing sector in the Indian sector indices. Using historical data, the LSTM model is used to predict future sector developments. The historical data from the past five years was obtained via Yahoo Finance from January 1, 2019, to December 31, 2023. The proposed method is designed for the ten sectors of the Indian economy. An LSTM model is designed to predict the future sector performance. To predict the three months after, i.e, on April 30, 2024, the actual and predicted returns of each sector are computed. This method is used to choose the most progressive sector based on a ranking system. The proposed model indicates the high accuracy of the LSTM model.