Impact of Demonetization on Indian Economy

Even as the demonetization drive was in full swing during the months of November and December, the media was full of scary reports. It was predicted that the cash crunch caused by the demonetization drive will suppress liquidity, subdue demand and force a downside in the overall business cycle. As data points finally start to emerge, a lot of the brouhaha over the demonetization seems to have been largely exaggerated. Or perhaps, the likely outcome was never really understood. Check this out… Continue reading

Four equity themes that will drive markets in 2017

Year 2017 promises to be a challenging year for equities. Firstly, India’s GDP growth may struggle to reach the 7% mark for the full year. That will bring a lot of old-economy company valuations into question. Secondly, US-oriented businesses will be trying to absorb the signals coming from Donald Trump on outsourcing, pharma audits and border tax. Thirdly, oil prices could finally show strength during the year and that will determine the fortunes of many Indian companies in the year. Lastly, two critical trends will drive Indian markets in the year 2017. Demonetization has set in motion the process of digitization and we will see greater convergence of payments banks, telecom companies and NBFCs. This process of digitization will be a key theme to play on in the coming year. Additionally, the passage of GST will be a major push for the coming year. Although the implementation will happen in July 2017, the impact will be felt in the coming year for sure… Continue reading

Demonetization – The big question is; after demonetization what next?

The demonetization officially ended on December 30th, after which one cannot surrender old notes of specific denominations. But the impact of the demonetization exercise is likely to last for much longer. Here is how… Continue reading

How demonetization will impact Indian banks…

The first week since demonetization was dramatic to say the least. The rush to surrender old notes and the limited release of new money created a huge monetary imbalance in the system. Obviously, it will take some time for the system to self-adjust and for normalcy to be restored. But during this period, there has been a phenomenal increase in the deposits with the banking system. According to early estimates, the first 3 days resulted in total deposits in the banking system going up by nearly Rs.350,000 crore of which over Rs.50,000 crore was received by SBI alone. On the day after the demonetization announcement, we did see a sharp rise in banking stocks. The question, therefore, is whether there is a fit case for re-rating banks. There are 3 ways in which banks will benefit from the demonetization drive. Continue reading

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