Demonetisation: triggers a temporary pause in the shopping spree
Bhagyashree Vivarekar / 27 Dec 2016
It has been almost two months since the surgical strike on black money in our country pertaining to removal of Rs 500 and Rs 1000 legal tender, has begun. This has impacted the whole economy due to a vacuum created in cash availability. The economic growth has slowed down by ~30%.
It has been almost two months since the surgical strike on black money in our country pertaining to removal of Rs 500 and Rs 1000 legal tender, has begun. This has impacted the whole economy due to a vacuum created in cash availability. The economic growth has slowed down by ~30%.
The demonetisation had impacted almost all sectors. As retail sector is cash dependent the panic has made the stock price of the major listed companies drop rapidly in first month after demonetisation. But the digital platforms for regular payment modes like PayTM, airtel money, freecharge, etc., have picked up pace to smoothen the transactions. Moreover, third party card payment gateways like Mosambee and others have also made card payment easy.The effect of this can be easily seen in the rapid recovery in the share prices of these stocks in the following month. Among these stocks, Future Retail witnessed accelerated recovery of ~14% from ~19% drop in month of demonetisation. While, Apparel and accessory player Shopper’s Stop saw a negligible recovery despite of festive season. Reason for this is, due to limited cash availability people are spending only on essentials. Moreover, the cash crunch has also impacted people psychologically as they are also limiting their electronic spending.
Also, the recovery in nascent demand is expected to allow the retail sector, particularly the major players to shrug off the short-term impact of demonetisation and return to their normal growth trajectories. Investors with longer term horizons could consider acquiring blue-chips from the retail sector on the current subdued levels.
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