 "Impact on sectors post demonetisation move")
Prime Minister Narendra Modi’s unprecedented move to render existing Rs 500 and Rs 1000 notes illegal sent a heavy jolt in the markets with benchmark indices Sensex and Nifty50 plunging the most since August 2015 in early deals. Further, rising prospects of Republican candidate Donald Trump on his way to becoming the US President also dampened investor sentiment.
While, the headline indices gained some grounds as the session progressed, The Volatility Index (VIX), a gauge of the market's expectation of volatility in the short term, jumped over 17 per cent.
We have identified five sectors that are expected to be hit most in the short-term as Rs 500 and Rs 1000 notes temporarily go out of circulation:
Real estate and building materials:
In the near term, real estate companies along with building material companies will see slow down which, in turn, could also impact housing finance companies (HFCs).
However, real-estate sector, which had witnessed large unsold inventory over the last few years, would become relatively affordable and in the medium term HFCs could see growth picking up, noted brokerage Angel Broking.
The BSE Realty index was the top sectoral loser in trade with DLF and HDIL contributing most to the losses. The index tanked as much as 13.77 per cent in intraday deals.
Consumer durables:
Brokerage Kotak Institutional equities sees a modest negative impact on consumption of high-value items as entities and individuals with large amounts of undisclosed cash (and income) will focus on managing their finances rather than spending in the short term. Rural consumption story will also turn negative.
Jewellery sector:
A lot of black money is circulated while buying gold and other jewellery items. The crackdown on the same is expected to pare demand in the short haul. Although, jewellery industry welcomed the government’s decision saying gold demand will rise in the long term as people will have more faith in the precious metal than the currency notes.
Non-banking finance companies:
Stocks of Non-banking finance companies, which largely carry out the transactions for the small and medium enterprises, will also take a knock. “MSME / SME borrowers (particularly with ticket size of Rs 10-50mn) may see their cash flow getting impacted in the short term,”said Religare Securities in a research note. The brokerage added that it sees asset quality and growth issues for NBFCs present in mid and large Loan Against Property (LAP) segment.
Liquor stocks & tobacco and casino:
Heavy amount of black money is also circulated in transactions for demerit goods such as liquor and tobacco. Stocks in these sectors took a heavy jolt along with India's largest and only listed casino company Delta Corp, which plummeted 20 per cent to hit its lower circuit.
