How Will Demonetization Of Rs 500 And Rs 1000 Banknotes Effect The Market?

This move is being hailed as a great move to crack down the black money menace in the Country. In his speech, the Prime Minister announced this as a move to fight corruption, black money, fake currency, and terrorism. Black money is considered the root of corruption and a source of funding terrorism in the country.

Demonetization will also have a temporary impact on the economy and specifically on cash-based businesses such as Real Estate and Jewelry. Real estate sector is expected to slow down as cash transactions will be impacted due to the withdrawal of legal tender of high denomination currency notes. Jewelry business has a swung in earlier hours of the announcement but the sudden crackdown in prominent markets of India, the illicit transaction stopped.

As far as the Securities market is concerned, this may impact harshly on the bourse in its immediate run but will be very helpful for the Capital Market in future. The two factors that will be impacted badly will be some penny stocks which were traded and settled in cash will be history soon. Other way around the Grey market and Dabba trading will seek survival. Long term benefits are expected, as demonetization will curb unaccounted income, therefore, increasing transparency in the Capital Market.

Recently, the Prime Minister also hinted at many such other initiatives in the future to curb the black money problem in the country. The PM urged support from the common man, as the country is facing a shortage of cash as the demonetized banknotes account for almost 86% of the currency in circulation.

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