Question

Identify three sectors/industries that are highly depressed and three sectors that are highly over-valued in your opinion. Provide at least four arguments to support your choices.

Answer 1

Three sectors that are highly depressed are as follows-

A. Airlines industry

B. Energy sector

C. Banking industry

Airline industries is facing credit crunch due to shutdown of operation and energy sector is also following the airlines industry because there is a lack of credit growth in such tough covid-19 Times and banking industries is also facing the same heat of lack of credit growth and many business going bad and liquidating. This can be attributed to lack of demand.

Three sectors that are highly overvalued are-

A. Technology sector

B. Retail space

C. Digital Services providing sector

I think this sectors are extremely overvalued because they are trading at multiple year highs and there is not much growth in their income where are retail sector is also traiding at multiple your heigs and these are also showing the constant growth whereas digital service providing sectors are providing with the growth but they have been excessively priced .

This can be attributed to exorbitant pricing and rational expectation.