Demonetization – A boon or a curse??

Presented by: Jeet Ranjan Ghosh.

What Happened?? On the late evening of November 8th, 2016, the Prime Minister of India,

Mr. Narendra Modi made an announcement of discontinuing the legal tender of the current 500 and 1000 currency notes. This announcement came into picture with immediate effect, thus creating a huge phenomenon across the country.

This step is highly criticized by the opposition political parties and created an atmosphere of disbelief and disagreement between different levels of society. However, looking at the long-term perspective, the majority of India’s population accepted the decision.

Now looking at the current scenario, it has been observed that, the demonetization will have an enormous effect on short-term and to find how it will impact overall scenario I did a small research.

Pros and Cons - Overall

To curb black money in the country. Making the money flow through the system.

Every transaction, be it small or big, will be accounted.

Inflation will come down, and more funds will be available to increase liquidity.

Consumption has taken the major hit.

Near term guidance for FMCG, Auto and other consumption oriented companies is highly volatile.

“Cash is no more a King” concept came into action.

Pros Cons

Beneficiaries and Losers Banks and Financing Institutions are the major beneficiaries without

any doubt. However risk of interest cut on fixed deposit and savings account could be possible

Loan disbursement will be increased.

Whereas,

All the consumer discretionary and non-discretionary will be affected largely. Sectors like Auto, Auto Ancillary, Gold, FMCG are at gun point. Apart from that, Luxury and Niche segments also witness a major downturn in the market.

Auto Sectors – Short-term effectsSales will hamper mostly in rural areas.New sales and enquiry will set back.Auto inventory will see some tailwinds, piling inventory could

increase the cost of storage.Companies may intrigue some new strategies to mitigate the

immense effect of demonetization, partially.Specifically, the auto companies those who have better

geographic presence will focus more on exports.

The lifecycle of the demonetization effect

Cash crunch will reduce the

cash availability

Discretionary

consumption will take a

major hit.

Auto and auto

related industry will face the first wave

Pre-owned cars sales will fall as

mostly dealt with

cash

Car inventory will pile up for short-

term

Different strategies

will be implement

ed

In long-term the demand will pick up again

With growing disposable income and easy loan availability

will spike up sales again

What could be the next step- StrategiesMay minimize the total production at current capacity level until it stabilize.

Come up with “Buy now Pay Later” schemes.

Easy financing. (Availability of loans, and 0 cost EMIs.)

Other sector to feel the heat

Auto Ancillary

Transportation

Courier and Logistics

What would be your next step in marketAs the demonetization is affecting the short-term consumption,

long-term investors can follow that “ Buy on Dips” strategy.

Correction is always providing an opportunity to widen one’s profitability.

Keep your watchlist ready. Be ready with cash.

Timing could play a very pivotal role now.

THANK YOU!!!!