500/1000- impact on sectors

Real Estate will be one of the most affected sectors. Everyone believes the same and hence the Nifty Realty Index closed at 175.2, down 11.60%.It is a popular bet in the fresh and resale market dominated by black money holders. The number of buyers will come down and low demand will bring about lower prices in the short term. However, it will subsequently help in improving the sector’s prospects. Unorganised builders will be most affected and the sector will drag down cement and ceramic sectors also along with it.

Gold prices: As investors rushed to invest in safe havens, Gold Futures touched a high of Rs31,376 and was trading at Rs30,500 up 2% on Wednesday evening. Local shops have stopped selling gold in exchange of old notes and prevailing prices are Rs31,800 per 10gm against Rs30,700 per 10gm on Tuesday. The Indian jewellery market will be the worst hit with the ban on Rs500 and Rs1000 currency notes. This is due to the preference of shoppers to pay amounts over Rs2 lakh in cash.

Banks: Banks are the back bone of this entire process and also the biggest beneficiaries. Post complete exchange of currencies, banks should benefit from higher deposits and transaction volumes, lower cash handling costs and greater acceptance of digital channels. There are likely to be secondary benefits for the insurance, asset/wealth management companies through higher financial savings.

Entertainment/Restaurants: One of the most common areas, where undisclosed income is utilised, is the entertainment and restaurant industry. There are plenty of restaurants out there that accept Credit and Debit Cards. Since a majority of the transactions are in cash form in here, it will be exciting to see how people react to it.

Beauty parlours: This has been a booming industry that works largely on cash. In the past few years, beauty parlours have mushroomed on almost every street of urban and semi-urban India. Although a few of the larger, organised parlours do accept credit and debit card payments, most parlours transact mainly in cash because it is often seen as a luxury spending fuelled by unaccounted income.

Tourism: Favourite foreign Tourist Destinations of Indian people like Thailand, Singapore, Malaysia, Maldives, Hawaii, Vietnam, Sri Lanka, Nepal, China, Indonesia and Dubai will see negative impact in tourism revenues all black money sponsored trips will come to a halt. Indian Local Tourism will also get affected as they lose large chunks of the pay-in-cash-only clientele. Illegal foreign currency conversion is also reported to be badly hit, because they were big acceptors of Rs500 and Rs1000 denomination currency.

Luxury items will have a drastic negative impact. Majority of the people spend their undeclared income on such products. After the decision, it is likely that all luxury segments like clothing, electronics, luxury car, furnishing and allied business will take a hit. Media and hospitality industries are also likely to get affected. more