Monday, 21 November 2016

Sensex struggles below 26000

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The surprise demonetisation move of higher denomination currencies by the government on 8th November 2016 took markets by surprise. After witnessing a tepid earnings growth for the last few years, markets were looking forward to a return to robust earnings jump in 2H FY17. The optimism stemmed from consumption-focused sectors riding on cash infusion in the economy due to the VII Pay Commission award to Central government employees and OROP to defence personnel (serving & retired) as well as a boost to rural consumption after a near-normal monsoon leading to bumper Kharif harvest after two successive years of drought. 


The currency crunch in the wake of demonetization and adjustments warranted due to shocks to supply chains and necessity to incorporate tweaks in the mode of conducting business would delay the demand recovery by at least a quarter.

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