Cash crunch bruises markets

Priya kansara Mumbai | Updated on January 16, 2018


While large-caps still languish, mid-, small-caps recover slightly

The fallout of demonetisation continue to haunt the Indian equity markets one month since it was announced. The Nifty 50 is down over 2 per cent; it closed at 8,246.85 on Thursday amid bouts of volatility (also caused by the rupee’s slide following the outcome of the US elections).

The outlook on the market has turned cautious while the targets have been revised downwards by some.

“Our 2017 target on Nifty was 9,000, which the markets almost hit before demonetisation. Post-demonetisation, our new target for the new year is 8,700,” said Harendra Kumar, Managing Director, Head – Institutional Equities, Elara Capital.

Sanjay Sinha, founder at Citrus Advisors also shares a similar view. “It is difficult to predict and give targets on markets for 2017 due to a lot of uncertainties, such as impact of demonetisation on the economy, cut in Sensex earnings, trend in FII flows, and announcements in the budget,” he said.

Gautam Chhaochharia, Head of India Research, UBS Securities India Pvt Ltd, believes that the risk-reward for Nifty is more balanced now compared to the unattractively skewed one prior to the recent correction.

Mid-, small-caps recover

Mid- and small-cap indices, which fell sharply on announcement of demonetisation, have, however, recovered partly.

The sectors which gained/lost the most on demonetisation remains no more the same one month down the line. For example, Nifty PSU Bank and Nifty Realty were the biggest gaineHowever, one month down the line, metals and media are the biggest gainers and losers, respectively.

“The metals sector is the least impacted by demonetisation. Also, international prices of aluminium, zinc and copper are going up. Media is the biggest loser as the negative outlook on fast-moving consumer goods, consumer durables and discretionary sectors including automobiles will impact their adpsends,” said Vinod Nair, Head of Research at Geojit BNP Paribas Financial Services.

Among the stocks in CNX 500, Balmer Lawrie (up 40 per cent) and Godfrey Phillips (down 28 per cent) stood out as the biggest gainer and loser, respectively, in the last one month.

Published on December 08, 2016

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