After difficult months of April and May, as we enter June, the falling coronavirus cases offer some relief. The drop is in keeping with reports that said infections in India would peak by the second week of May. With cases receding and vaccination picking up, there is growing hope of return to normalcy.
It is too early to say when we will be out of the woods, but from a long-term perspective, the outlook for the economy is looking more positive. Taking a leaf from how developed economies are moving towards normalcy, India can draw its own template adopting their learnings as well.
Once we start going back to normal, sectors like consumer discretionary, hospitality and aviation can do well in the coming days.
Many companies in these sectors have had a difficult time as mobility has been severely curtailed and there has been an overall drop in consumption.
These sectors are expected to pick up as soon as lockdown restrictions ease. Mobility is the key for these sectors to perform well. It is also anticipated that a segment of people may take some time to step out as they may remain cautious, hence one must have patience with investment in these companies.
Hospitality and aviation can do well, as the demand will go up once people start travelling for work and leisure again. The consumer discretionary sector, which has different industries, relies heavily on domestic consumption. Lack of movement and restricted spending has hit the sector. The overall confidence level of consumers, particularly for discretionary products, is expected to go up when they sense stability in jobs and income.
It is not only those whose jobs or incomes were affected put off spending but even those who are economically stable are also being cautious. Across the board, consumers are deferring decisions due to an uncertain economic environment.
Demand will recover when these sentiments change and consumers feel more confident about the external environment as well as their personal financial situation.
These sectors can generate reasonable returns as demand is expected to recover quickly but one must do some due diligence before investing.
Some companies may revive quickly when demand surges as they are well managed and better equipped, while others may take time as they have been stressed in the current environment. Hence, adding the right companies and having patience with them can work for investors in the coming days.
(The author is co-founder of MyWealthGrowth.com.)
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