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WHAT YOU NEED TO KNOW ABOUT DEMONETIZATION'S EFFECT ON ECONOMIC SECTORS

The government's decision to withdraw notes of Rs. 500 and Rs. 1000 as legal tender currencies hit everyone hard, be it the corrupt or the common man. Even though the change is being hailed by many experts as the ultimate surgical strike against black money, many are arguing if the method to implement the policy was right. Be it spending several hours waiting in ATM queues or finding out later that the ATM is out of money - it has been anything but convenient for the citizens over the last couple of weeks.

There were a few sectors which were affected the most ever since the policy was put into place. Here are four such sectors, and a tip on how to react to these situations:

Real Estate Sector: The real estate sector is likely to be hit adversely owing to the lack of 'under the table' transactions wherein the buyer could pay 20% to as high as 80% for deals in cash, making it a hotbed for the use of black money. This will not be possible at least until the time the new currency is set in.

This will decrease the demand for property and also decelerate the property and real estate scope for investment.

Investment Tip: You will be in a great position to negotiate hard and get a good bargain for your prospective home buying; be it for residential purpose or investment, be alert and stay smart with this.

Banking and Financial Sector: This sector is more likely to benefit the most, courtesy of the high frequency of deposits being made. The use of debit and credit cards will increase immensely as well along with the Net Banking facility. Financial Services will be the need of the hour for each and every individual, especially the ones in the business community.

Investment Tip: Though it is too early to comment, but the time has come wherein rather than making a bank deposit, you should rather buy their stocks. You could also choose to invest in a good mutual funds scheme because most of the diversified MF schemes have around 20% to 25% minimum allocation in BFSI.

E-commerce Companies: E-commerce industry, specifically the e-wallet companies like Paytm, Oxygen etc. wallet companies will increase their market share.

Investment Tip: You should be using these wallets wisely during this period. These merchants are willing to spend a lot of money on acquiring newer clients as partners and sponsors - meaning more lucrative offers for customers using the service.

Stock Market: Commodity transactions and transactions in the general cash market will feel the heat immediately apart from the general elevation of uncertainty. The equity markets are volatile and react based on events happening locally and globally beyond the fundamental grounds of companies those are traded. The reactions can be unpredictable at this stage and we need to wait and watch.

Investment Tip: Keep looking at stock market investments via the mutual fund route. Avoid direct investments based on hearsay or news or tips to buy stocks unless you yourselves are a professional investor as it is never possible to time the market. If you want to really buy direct stocks, then do your research thoroughly and invest only in the right fundamental stocks.

If you already have existing FDs or savings lying in your bank accounts, the same should be invested via STP route i.e. systematic transfer plan of mutual funds. This will help you to make the most of the current market movements.

If you have any queries or doubts, write to us at jaagorein@gmail.comor just comment on our Facebook and Twitter page.

More about the Experts:

Rishabh Parakh

Rishabh is a Chartered Accountant and a founder Director cum Chief Gardener of Money Plant Consulting, A leading tax and investment service provider He also writes for several leading publications in India.

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