Are we out of the woods yet?

The question everyone has is “Is this the bottom?” Trying to catch tops and bottoms in the market is a futile exercise. Nevertheless since the question is asked so often, I will try and add my two bits worth to the subject matter.

Let us look at individual sectors and companies to see if this is the worst that can happen. Any spending which is discretionary in nature (even an option to postpone will help) will suffer. This is a time when interest rates are high, EMIs and loan tenures have shot through the roof, fuel prices are pinching, the job market is uncertain and demand is faltering. In such a scenario, neither are families nor are corporates going to spend significant sums in buying cars / two wheelers / trucks / buses or go on a holiday or dine out or go to the movies or put up a new factory …….. you get the idea. People are just trying to hang in there and not do anything ambitious. So here are sectors where I feel worse times are ahead in terms of earnings. Whether the stock prices have factored in this is a moot question.

Sectors to avoid

Auto (Cars, CVs & two wheelers)

Airlines and Hotels



Capital goods

Real Estate / Infrastructure companies

Utilities (surprising? there will not be a demand reduction, there could be a P/E reduction in a high interest rate scenario)

Stock brokers / Investment banks

Commodities (oil, copper, zinc, aluminum, steel…a bubble about to be burst, but that is a subject matter for another post)

Any bull case scenarios for these sectors? All the blah blah written above still does not answer the question whether this is the bottom but if large segments of the industry are going to see pain, I personally do not think we are out of the woods yet.

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