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Currency ban will aid the market & the economy feel stock brokers

Ashwin Aghor | Updated on: 10 February 2017, 1:40 IST

The decision of the central government to cancel Rs 1000 and Rs 500 notes has impacted the entire country. While the effects of the decision on common man are being debated, the Bombay Stock Exchange, one of the biggest transaction hubs, is elated and stock brokers are anticipating surge in the market.

Sunil Joshi, of SS Joshi and Associates, a Mumbai-based stock broking firm, said, "This is a positive move and will help revive the market. Though it will create some issues, they would not be long lasting. At the end, it would help the economy of the country."

Joshi said that illegal transactions like Dabba Trading will be completely washed out as it would now be impossible to make cash transactions. This decision will also impact the banking stock prices.

"Since the banks will receive huge funds soon, the banking stocks will go up in days to come. In all, the decision is a welcome one and will certainly boost the economy and end the black money issue," Joshi said.

Kailash Rajwadkar an investor from Mumbai said, "This was inevitable. Cash was losing its value since it was going in other assets such as gold and real estate in an unorganised way. Now the currency will flow as a financial instrument. People will now prefer investment avenues such as gold bonds and Real Estate Investment Trust (REIT)."

"REIT is like investment in real estate and the returns on this investment are like rent on property. These investment avenues would be the most preferred after PPF accounts and fixed deposits. The decision will bring about the change of investment pattern. The investments in financial assets will grow and investments in physical assets will reduce. The decision has brought about the huge change, which even the Reserve Bank of India could not achieve with its Credit Policy," Rajwadkar said.

According to him, the interest rates will be revised as the banks will start getting huge funds from Thursday onwards.

"The RBI tried its best to bring down the interest rates, but banks never reciprocated. Now the banks will bring down the interest rates as huge funds will start flowing in. The transition period will see a lot of currency moving into financial assets," he said.

Rewarding honesty

Mumbai-based investment and stock market consultant Pradeep Gokhale feels that the decision will not at all affect those trading in stock market since all the transactions are done through banks and under the supervision of SEBI.

"All the transactions at BSE are accounted for and hence safe. Only those involved in black money transactions will be affected and will have to pay a huge price for their deeds. The sectors such as real estate will be the worst hit. Since every big transaction has half the portion paid as black money. The handful of wealthy and corrupt people had virtually thrown honest people out of the market," he said.

Real estate sector had become a heaven to park black money which will now be forced out as the prices will go down. Gokhale feels that this is the biggest ever decision taken by any government in the country and it will go down in history books.

"This was necessary. Such harsh decisions need to be taken to clean up the economy and curb black money. I have not seen such a bold decision being by any government in the country post independence. With the decision, honest people will be rewarded for being honest. This has never happened in the country," he said.

The entire underground economy based on the black money will collapse soon, there is a lot of black money in the country and it will now either be declared or forgotten, said Gokhale.

"Those who have stashed black money will be forced to declare it and face the action or forget it forever. Honest people of this country will now be able to live as honest people. Real estate prices will plunge as there won't be black money to complete the transaction of highly overpriced properties. All the sectors where black money was used will collapse. Good people will get opportunity to grow and corrupt will be thrown out of the market. The society will now turn around," Gokhale added.

First published: 9 November 2016, 5:02 IST
Ashwin Aghor @CatchNews

Journalist based in Mumbai.