Impact on indian markets after ban on 500 & 1000


(fabregas) #21

Missing the industrialization bus and this demonetisation are not directly comparable. India at that time had a score of other problems, some even existential, to deal with - illiteracy, lack of education, the British rule, Mughal rule, caste based oppression etc. While the British society was rich, educated and did not suffer from any of the 3rd world problems. Also since then India has not missed the buses of mobile telecommunications, internet, ecommerce etc

Well no one knows right now how much of the black money is in the form of cash. Agreed, people do tend to buy gold & real estate to park their black money, but this does not necessarily mean that the cash form is insignificant. The actual truth will only by out post 30th December. I won’t assume anything right now.
And since the exchange of notes is expected to be done away with completely and people will only be allowed to withdraw money from their accounts, people with ‘black’ cash will have limited avenues to convert it to white. Lets just wait and watch. Reducing the cash crunch does not mean that the black money is converted to the new currency notes.


(fabregas) #22

Quite relevant in this context.

Five stages of reaction to a disaster

  1. Self-Preservation: The first reaction to a disaster is fear and initial anxiety. People are afraid. They seek information. They do what is necessary to figure out how to save themselves.
  2. Group Preservation: With the right information provided, there is a tremendous effort—usually guided by what we call pro-social behavior—to help others.
  3. Blame Setting: This involves internalizing and many psychological consequences fall in place during this stage. With disasters, we talk a lot about emotional responses, about change in normal activities. This leads into efforts to try to figure out who is to blame and to do something about it by addressing the vulnerabilities and strengths that we have that resulted in that hazard becoming a disaster.
  4. Justice Seeking: This involves externalizing. It’s part of seeking redress and leads to taking action against the perceived perpetrators of the disaster.
  5. Renormalizing: Individuals and groups adapt to the threat.

https://www.farnamstreetblog.com/2010/05/five-stages-of-reaction-to-a-disaster/


#23

it is goingto be good. Invest in next 2 qtrs at right price and whenever there is a fall.


(divyansh ) #24

Plz don go by what is being aired on DD news ( cause thats controlled by the govt) there are smart people both sides who can convince us of the goods and bads of the current crisis. Best is to take a wait and watch apprqoch. C what the results tell us about the impact on business and then take a informed call.


(Bull_Pravs) #25

Let me put my 2 cents as below:

  1. As deposits in the bank are increasing, interest rates will come down. And whenever rates come down, stock markets goes up as funds flow in.
  2. People will come for tax free returns to avoid black money creation in future and long term equity investment is the place for this.
  3. There is increased awareness in people about financial terms after black money strike which will eventually create awareness about benefits of long term investments in markets.
  4. As realty market slumps, investors will be pulled into equity markets for good returns. They will come with good amount of money.
    So entire scenario will take sensex/nifty to whole new levels in coming months. Let me know if anyone can put better light over this.

(Subash Nayak) #26

And you think market will wait till you make your mind or companies start posting results !!!

Superb buying opportunities due to massive fear in the market is rare, and god send gift to those who can think through constant pestering of news, and views on demonetization. Demonetization is the massive reform and in long run it will help Indian economy in very positive way. It hardly change the supply/demand dynamics as people’s buying power is not at all diminished (on an average), and at the same time bringing massive amount of liquidity to the system. This in turn will pull down interest rate, a very positive for equity market.


(divyansh ) #27

Markets always provide us the opportunity. It has been seen before also that prices of excellent business remained depressed for elongated periods. According to me one should differentiate stocks with the following approach 1. High uncertainty high risk 2. High uncertainty low risk 3. Low uncertainty high risk 4. Low uncertainty low risk
2. and 4. being the best way to go about things.
Since demonetization I can easily bet on emami or the fmcgs of the world . demonetization also has no precedence and hence I would not like to guess it’s effects . curbing the cash economy with the jolt will have its effects and for sure who comes out as a winner will be know only with time. Partial capital might be deployed now and more when the results pave the way. This way we insure a decent margin of safety.
Regards
Divyansh


#28

Your statement is made as you dont know who is Gurumurthy and what is his calibre. Dont look at DD news and look at what he says and then analyse and take your call. A thorough finance person can easily understand the impact of what he says. If you have time study the balance sheet of RBI. Demonetisation loosely used . It is on the existing stock not on the future creation which will take some time.

One of the important rules in investing - Avoid biases and necessarily biases culminating out of either ignorance or without deep study.


(fabregas) #29

http://economictimes.indiatimes.com/wealth/real-estate/government-looks-to-use-demonetisation-windfall-in-new-housing-scheme-with-cheaper-home-loan-rates-of-6-7/articleshow/55689343.cms


(Yogesh Sane) #31

Maruti car sales up 12% (Domestic up 14%) in Nov 2016. This is a first concrete evidence about effect of demonetization (or lack thereof) on durable goods. Although this is just one data point, car sales is an important indicator.

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/F191FBE4_B137_4651_8877_ED39BFCA2FF0_095455.pdf

so far, all other articles on demonetization are just opinions and no one knows for sure how this will play out. Going by rebound in Maruti share price, the impact may be limited to certain sectors only.


(fabregas) #32

Eicher sales also up by 41%. However I think, rural India and the poor are most affected by demonetisation. So the results of FMCG companies, Bajaj Auto, tractor sales, fertiliser companies etc would be more relevant on gauging the true impact of demonetisation.

Bajaj has said they expect a 25% overall drop in sales in November. 50% in rural India and 25% in urban markets. More importantly, decline in enquiries was down 80 percent across the country, the President of the Motorcyle business at Bajaj Auto said. However this was on November 22nd. Situation would have improved in the last week.

Read the full interview here:


(fabregas) #33

A question on Maruti & Eicher sales -

Eicher and Maruti models are in high demand, and there is usually a waiting period for their models. So if someone books a model 3 months in advance, i.e. in August, and it is delivered in November, when does the company record the sale - August or November?


(Yogesh Sane) #34

November. Sales is booked when title is transferred from company to customer or dealer as the case may be and a payment obligation (i.e. receivable on company’s books) is clearly established. If customer pays advance, it is treated as a liability on company books and not sales.

FMCG stocks have come off highs but that more like a froth settling down rather than some long term capital loss. Sales can be settled using credit / non-cash mode. There will be some destocking in the distribution channel though.


(Kumar Saurabh) #35

Does SIAM captures POS numbers or dispatch numbers. I believe its dispatch numbers (few VP colleagues also said so) and that wont capture demonetization impact


(fabregas) #36

Bajaj Auto’s domestic sales were down 10% YoY in November. Overall sales down by 13%. So the actual impact is not as high as was expected. President of Motorcycle business at Bajaj Auto had said on 22nd November that impact is 25%.


(divyansh ) #37

I m not sure that all this data is reliable . there is still complete cash crunch in small towns in Punjab with atms and banks all dried up. With this low liquidity and cash crunch what kind of people will buy motorcycles or autos. Even the salaried class OS finding it difficult to spend. Rest all.need transactions to earn and then spend.


(fabregas) #38

People could pay via cheques, electronic transfer etc. Its just low liquidity and not low income.


(aashish2137) #40

This is a very interesting take on the current situation of agriculture and primary rural industry. If the author’s economics is correct, could it mean good (inflationary) times for agri and milk stocks?


(Ludo King) #41

Mahesh Vyas, CEO and MD of CMIE, writes that India’s GDP for next 5 years will likely be 6%: http://economicoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&nvdt=20170112174949646&nvpc=035000000000&nvtype=ANALYSIS+%26+OUTLOOK

Before the demonetisation shock, the Indian economy was expected to gradually accelerate its real GDP growth rate from 7.5 per cent to over 8 per cent per annum.
We now expect this growth trajectory to shift down to about 6 per cent per annum for the next five years. The economy is unlikely to achieve a growth of 7 per cent any time during the coming five years.

We expect this low demand to persist till three conditions are met. First, liquidity is fully restored, secondly, confidence in liquidity is fully restored and thirdly, consumers are yanked out of their equilibrium at lower levels of consumption of non-essential commodities.


(Subash Nayak) #42

It is 1000 time better to ask guys at the street to see where country is going. Arm-chair economists with certified expertise in building excel models were never correct in their prediction about direction of economy in the past, nor are expected to be correct in future. What amaze me is that people still find in worthwhile to listen to views of economists even after blunder after blunder in macro-economic forecasting, be it sub-prime crisis, decline of EU, and so on.

Exact the same economist will raise his target within 6 month, once ground situation start showing 8% odd growth rate, as opposed to his predicted 6% rate, excuses will be given (which are in abundant supply all the time).