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The global Covid pandemic and conflict in Europe are recent arrivals into the mix of variables that investors have had to navigate, and they have complicated the landscape considerably. Their unpredictable nature brings with them a host of second order variables straddling supply chain and labour force challenges through to an emerging tussle for a new world order. A decade of low interest rates was mistaken by many as a quasi-constant that has now returned as a dynamic variable as central banks wrestle with high inflation.

Industrial activity is likely to decline as inventory works through the system but given major markets such as automotive and aerospace were seeing choked demand through supply chain issues, again we expect a shallower trough. Housebuilding and RMI (repair, maintenance and improvement) will have a tough H1, but given the rapid re-pricing of mortgages post Prime Minister Truss, the outlook isn’t as bad as it was in September. Valuations have corrected quickly and looking back it appears all consumer orientated stocks overshot to the downside during the chaotic period around the Truss budget.

While the list of potential divestment candidates is long, most of the limelight is likely to be hogged by sectoral behemoths and quasi monopolies such as Coal India, Hindustan Aeronautics, and Airport Authority. Given their size, scale of operations and financial depth, these companies are likely to attract premium valuation on the stock exchanges and will account for the bulk of the dividend receipts for the government.