3 Jan 2017

Demonetization left the market exposed

Negative investor sentiment arising from the demonetization move left the market exposed to the sustained liquidity drain towards the US in the absence of clarity on the outcome of the policy. What is clear is that GDP growth in the third quarter of FY17 will be reduced by some 1-2%, dragging the year’s outcome to somewhere in the 6.5-7% range. The outcome depends on how quickly a recovery develops when the availability of new currency notes catches up with demand and deferred purchases of discretionary items are completed. Meanwhile, non-cash transaction volumes continue to rise.

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