Wednesday, November 30, 2016

2016 will be different

The domestic stock market has reacted negatively to demonetisation and opened lower after digesting the intense social media heat both for and against demonetisation. However, the market gained sanity later and reacted calmly by the close of the week. 

Much has been said about demonetisation but no one denies the pragmatic outcome of the same. Banks have started reducing interest rates and some of the private lenders have already reduced rates by 15 to 20 bps. 
The stock market is altogether an independent animal with has scant regard to demonetisation, if any. However, such moves should bring a positive shift towards a cashless economy. Combined with GST, it would possibly help tame corruption and a new era of meritorious society should emerge. 

In the stock market, open interests in index futures have fallen sharply and are running on the lower side of the annual averages. Volatility, too, is cooling down slowly, which is good for the health of the market. 

Stocks that are banned in the derivative segment stand at a negligible level, indicating a moderation in leveraged positions. Normalcy is creeping back into both the stock market and the economy. 


The stock market is limping back to normalcy. Greed and fear seem to have abated and all the external macro-factors have almost been discounted. 

The massive fall in stock prices on fears of a slowdown seems to be overblown from market’s perspective. It is well known that the market is a six-monthly forward discounting machine. 

Any negative event, whose effects are to be felt within one or two quarters, is almost always discounted. Thus, there is nothing that investors must worry about regarding the effects of demonetising high-value notes, as it has already been discounted by the market. 

The recent fall, therefore, creates a compelling opportunity to buy great businesses. 

Investors should take the opportunity and start purchasing Equity Mutual Fund for long-term portfolio.

views and recommendations expressed in this section are personal. Please consult your financial advisor before taking any position. 

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