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After a gut wrenching fall, certain sectors like sugar, real estate and construction are showing the first signs of stabilising. The question that begs asking is whether these stocks have bottomed out. Bottoming out calls are never easy and always fraught with danger. But they certainly make for interesting examination.

Let us take sugar first, since that has suffered the most. The business has not bottomed out yet. Domestic oversupply will continue to pin down sugar prices and companies will report dismal numbers for the next four quarters at least. Even after that, one cannot predict a turnaround with any certainty.

So why have sugar stocks stopped falling? Perhaps because some long term investors have started accumulating. At some point the cycle will turn, and maybe Balrampur Chini at Rs 1500 crores and Bajaj Hindustan at Rs 2400 crores market cap represent deep value. But that is only for the investor who is willing to forego returns for the next year and more. Stocks often bottom out well before businesses do. Sugar could be such a case, but there is pain left in the sector, so the wait for returns may have to be a long one.

What about real estate? Stocks like Unitech and Parsvnath have stopped falling too. This sector corrected for two reasons. Overvaluation and fear of a correction in realty prices triggered by rising interest rates. The first problem is almost gone.

The froth has been skimmed off real estate stocks. The second problem lingers. Till rates peak out, at any rate. The overownership from retail and HNI  (high net income) segments has also been wound down significantly. My guess is that there is not much downside from here.

But serious outperformance may have to wait a while. For long term investors, not traders, some stocks in this sector present accumulation opportunities. That is the thing about catching bottoms, one has to be brave and patient. Sometimes the end justifies the means.