Demonetization effect on Banking, FMCG and Real Estate sectors 2016-17.
The demonetization of 500 and 1000 rupee notes have dipped market very badly as lots of investors started withdrawing money out of the market. Some sectors like real estate where most of the black money is involved has effected very poorly.
Here is the sector wise analysis of the stock-market due to the effect of demonetization.
Banking and Finance:
At first when the demonetization news was announced, investors thought that from then onwards each and every transaction in the market will happen through banks (which is true) so for the first 4 days the almost all the major banking companies SBI (10%), BOB (11.21%), ICICI (3.4%), PNB (13%), BOI (14.4%), Union Bank of India (11.4%) soared. After that cash was being accumulated into banks and there is no outflow of cash from the banks so investors thought companies has to pay the minimum 4% interest to the depositors and hence companies income through loans are low compared to depositors; so investors started losing confidence in banks from then onwards till Jan 1st almost all biggies SBI (13%), BOB (7.3%), ICICI (13%) , PNB (27.7%), BOI (14.2%) and Union bank of India (15.5%) share prices fell down.
Later Narendra Modi announced benefits on home loans of up to 9 lakhs; the poorest and the most underprivileged will get a 4% interest benefit. For home loans of up to 12 lakhs, they will get a 3% interest benefit and all the biggies announced lending rate cuts ranging from 40 to 90 basis points with this various companies will take loan from banks for development purpose, no of people buying homes will increase so in the upcoming few quarters banking sector has huge potential to grow up to 9.5%.
Due to demonetization customers dint have money to purchase daily consumable goods, so market value of FMCG went down due to less sales but after Dec 30 cash started flowing in the market so people started purchasing goods from the shops due to this market value of FMCG started increasing, Even though the share prices of these companies went down they will recover and bullish within 2 to 3 months.
We can see the real estate sector in two forms 1. Luxury homes sector and 2.Residential homes
- Luxury homes: – The luxury and high-end segments of residential real estate have seen a major impact, since the legal banking/financing channels have accounted for only a small part of all transactions in this space, which has seen many payments done in cash, which resulted in luxury properties dipping by 25%-30%. Prices of so many companies Delta crop (50%), DLF (27%), HDIL (27%) fell down drastically.
- Residential homes: – In this sector almost all the transactions happen through banking/ financial channels so even if the share prices of these companies fell down due to demonetization news such company share prices will correct within a few months. Some of the companies that is happening like this are KNR construction, Hindustan construction.