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  • Category: Central Government

    What would be the effect of scrapping of Rs. 500/- and Rs. 1000/- notes on stock market?


    Based on our Prime Minister's scrapping of Rs.500 and Rs.1000 notes how will the share market progress? After the rejection of 1000 and 500 rupee notes, shall anyone buy shares in this market?

    Yesterday night our Prime Minister has announced that the currency notes of denominations of Rs. 500/0 and Rs. 1000/- has been scrapped. The bank will be closed today ( 9.11.2016) for public. The ATMs are closed today. Tomorrow (10.11.2016) also most of the ATMs will remain shut. This has been done to check black money, corruption and terror financing.

    But I would like to know how would the share market behave today (9.11.2016) and tomorrow (10.11.2016) after this historic announcement? Will the market react negatively? If yes, then how much correction can be expected? Can it be taken as buying opportunity?

    Experts may kindly guide.
  • #139665
    The market today was showing a knee jerk reaction to various socio economical changes happening around the world. It is bound to be uncertain for few days to follow.
    Today markets opened 1000 points lower and has subsequently recovered and are trading 380 points lower. Predominantly there are three reasons for this.

    1. PM Narendra Modi's yesterday speech
    2. US election and electoral promises influenced our markets
    3. Desperate attempt by black money holders trying to convert black into white.
    4. Unprecedented chaotic situation promoted instability in market.

    Market is bound to be back strong and if you are skeptical about any person entering market, trust me this is going to be the greatest time of this year for people staying in market in terms of volume.

    If at this point of time, your holdings are not making loss, then you can certainly hold them. You can make a cash cow.
    Happy trading

  • #139667
    As a result of taking bold decision to curb the denomination of currency notes of Re 500/- and Re 1000/-, the share market reacted sharply with a deep plung initially. However, recovery to the extent of 1000 points could be seen later on.
    This seems to turbulent phase for the time being and we could witness wide fluctuations for the time being and later after a couple of weeks, the market will stabilise and even a surge in the Sensex may be noticeable later on. Our economy reflects strong fundamentals and as such we should not be panic with the initiative taken by our Prime - minister Mr Narendra Modi. This drastic action was necessary with a view to plugging the influx fake currencies from the different countries such as Pakistan and Bangla - desh.
    This is the time of correction and this transient phase will remain for maximum a month. This time can be utilised for purchasing the shares but before that approach a reputed financial consultant having sufficient exposure in this line.

  • #139668
    There are plenty of effects that are observed as the notes are phased out overnight. This was done to check how the rich people within the country were hoarding the cash and saving tax. Few of the effects were immediately seen.

    1. Lack of the cash in ATM since 8th evening.
    2. Private hospitals, petrol pump and shops not accepting the notes despite the notice given by the government.
    3. People desperately in need for converting their cash into other notes.
    4. People with black money spending the cash into purchase of gold. Creating artificial demand of short term.
    5. People trying to buy real estate trying to create demand for the land or the ready flats. This in turn created short inflation in real estate market as not all builders agreed to cash deals.
    6. Share market had minor crash due to people in upper stature spending money to get it out and saving it in reliable places such as real estate, deposits etc.
    7. Lot of people waiting for depositing their 500 Rs and 1000 Rs such that it adds lot of money into the bank. This will reduce the interest rate on term deposits and recurring deposits.

    For normal people, there is a lot of time upto 30th december to switch the 500 Rs notes. So there is no need to panic. Also the new notes will be out from 11th onwards through ATM. Everything will be taken care of by both PSU and Private banks.

    In short this has created short panic for normal people. But it'll pass soon. And people with black money and tax avoided money will go back to the banks. This will improve our economy and also make it easy for us to see how the black money within our own nation had affected us.

  • #139669
    Today market value is reached high. Even gold value has also raised high. This sudden change by PM Modi will definitely effect the market. Buying today, tomorrow or one week is not advisable.

  • #139698
    It is an established scenario effect that stock market, bullion market and real estate sector have always linked effect. If one goes up the other goes down. That is because investments are rotated among the three.
    It is also believed that the major portion of black money in the country is invested in these three sectors.
    Now, due to the sudden demonetisation, there will be a crunch of liquidity with those who deal in these. Those who got the early signals and took reaction invested the money in bullion. So that made gold price go high.
    But then there needed selling of stocks (immediate or future contract) to have liquidity. That made stocks come down.
    Very soon the real estate sector also will show downward trend.

    All these three sectors will remain subdued till shock effect withers and till fresh bout of funds get generated. The fear of taxmen also will be therefor some more time.

  • #139716
    Stock market will be affected and is being affected by demonetization of currency notes of 500 and 1000 denomination. Stock market will go further down. Most of the business and companies were running on black money. Suddenly a courageous decision was taken by our Prime Minister to demonetize the currency note of 500 and 1000. At least up to the month of December 2016 be very careful while playing in share market. Real Estate, Infrastructure, Manufacturing company, Cement and power sector will go further down.

  • #139747
    Since the relevant time about which you have asked the question, has passed I will write a short answer. The banned black money may have a negative effect on the market temporarily since the economy had this money all along in its stride. But definitely, this banning will have very good long term effect on the economy. Once the black money has been flushed out of the economy the economy will be more healthy and market will gain.


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