write a letter write a letter to the editor of an English daily are going Ada for or against the impact of demonetisation in India
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I am sending you the content. it may help you...... Indian Prime Minister Narendra Modi, through a live broadcast announced [on November 8] that R500 and R1,000 denomination notes are going to be invalid for legal tender.
They may be exchanged at banks with proper ID proofs and documentation over the next two months. This is massive. In the long -term, this is hugely positive as it accelerates the financialisation of savings away from suitcase currency, gold and property (half of India’s property market runs on cash), which should in theory lower bond yields. But over the short term, expect huge disruption.
Estimates suggest that roughly between a third to half of India’s economy runs on black money. Several sectors in India run almost entirely on cash. Expect demand and the velocity of circulation to collapse in the short-term. And a material market reaction, with realty, jewellery, banks and consumer discretionary stocks being the most impacted. Although, as always with these things, one never knows exactly how the Reserve Bank of India will compensate, and to what extent local insurance behemoths will cushion the fall.
Our advisory portfolios continue to be bearish to marginally net short, with consumer discretionary (one jewellery) and banking stocks with added tail risk protection on the Bank Nifty index. Just to reiterate that beyond this short term disruption, the move underscores the credibility of this government.
The familiar funding sources for the old political elite, both the Congress and regional parties, is finished. This is especially noteworthy given the proximity to local polls in the large state of Uttar Pradesh. What is clear is that from politics to economics, a new paradigm is emerging. And for the better. The architecture of several sectors from manufacturing/infrastructure and finance to tech and pharma (external), is being redrawn. Don’t expect a runaway bull market in the short-term until the dust settles.
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