What to expect post the surgical strike on Black money?

Modi strikes again - this time on black money. The unexpected announcement has made Sensex plummet by ~1000 points and has eroded the market cap of most of the companies by 5-10%. To top it, the win of republican candidate Mr. Donald Trump has surprised the markets.

We would like to assuage our readers that we don’t see any panic situation arising out of these developments. In short term, there would be volatility in the market. However, we believe the market conditions to normalize in the next 3-4 months. We advise investors to be beware of greed and fear. Also, the correction in market provides good opportunity to buy stocks which are fundamentally strong. Hence, rather than looking at sector it would be better to look at stock specific buying opportunities.

Some sectors that can see high volatility are real estate, construction, cement, consumer durables and NBFCs. However, we feel pharma, FMCG, Banks and infrastructure stocks will provide good buying opportunities.

Important Points for exchanging notes

We would also like to make our readers aware of the process of exchanging currency with the banks.
1)      Deposit 500 and 1000 rupee note in banks or post offices from Nov 10th to December 30
2)      The limit for exchange is Rs4000.
3)      Please carry Aadhaar card or Pan card as the ID proof.
4)      Tourists can also exchange the notes on airports
5)      After December 30, the notes can be deposited with RBI with a declaration.
6)      Please note that the 500 and 1000 rupee notes are valid for use at petrol pumps.

Way ahead

We consider it as a bold move which will augur well for the economic development and will reduce the leakages in government spends. This will also contain inflation due to eradication of fake or black money circulation in the economy. Also, as the efficiencies of transparency reflects in the system, we expect markets to recover.