Demonetisation: Realty Index Worst Hit

Indian markets have been one of the worst performers globally and the reasons are obvious for all the market participants. The demonetisation move has impacted the market’s mood and the dampened sentiment amongst the investors along with heavy selling from FIIs has propelled the markets to correct the way they did. Even as Indian market was getting ready to digest the US Presidential election outcome a bigger surprise announcement on banning the Rs.500 and Rs.1000 note actually shook the nation. Markets reacted slowly but surely as the impact of demonetisation was felt across the nation. It is widely speculated that the GDP might slow down by half a per cent and that the operating profits may also drop heavily for many of the listed entities.

Sensex has dropped by a good 5.91 per cent; whereas Nifty by almost 6.34 per cent in past couple of weeks. On the contrary the US markets as represented by Dow Jones Industrial Average have gained almost 3.77 per cent and is scaling a new high with every trading session. NASDAQ which reflects the performance of the technology stocks has gained almost five per cent; whereas Nikkie was the biggest gainer with gains recorded at 5.77 per cent. European markets showed good performance with French CAC 40 and German DAX gaining ground; whereas FTSE shed some points on the Index. 

Realty sector shed almost 18 per cent and has been the worst performer in the past two weeks owing mainly to the demonetisation move. Small-cap index and Auto Index are the two indices that took a heavy beating and cracked down by more than 10 per cent. Power sector was amongst the sectoral indices that fell the least. The Power index dropped by a mere 2.97 per cent, thus outperforming the markets. Mid-cap index along with FMCG and IT index cracked more than 5 per cent in past ten trading sessions. FIIs have been net sellers to the tune of Rs.22,534 crore in the past 10 trading sessions. At the same time the DIIs have been net buyers in the market to the tune of Rs.8,927 crore. 

On the positive side, with the current market fall, several of the large cap and mid cap shares are now available at an attractive price point for long term investors. The valuations have become attractive and fund managers sitting on a cash pile may start accumulating quality stocks at right price. With almost 5.44 lac crore of money being deposited in the banking system and at least 1.2 lac crore of new notes already being distributed, the banks could turn out to be the biggest gainers post demonetisation. Bankex was one of the better performing index with only Metal index and Power Index outperforming the Bankex. Demonetisation and Trump’s electoral victory are two events that have triggered the market downfall. The lower prices now have already factored in the demonetisation effect and markets should start taking cues from US fed rate announcements and RBI’s take on interest rates. There is a good chance that interest rates might be reduced in India and the markets will soon start factoring in the budget announcements.