Ash Wednesday

Ash Wednesday, the religious day happened in February but for many a investor / trader, its today that holds more importance given the double dhamaka we have witnessed.

The move yesterday to demonetize 500 / 1000 Rupee notes while not essentially not something that was totally unexpected (from Ramdev to Subramanian Swamy among others have long called for it), but the ablity to make such a call, called for real political strength given the fact that Politicians are at the top of the food chain when it comes to black money.

US Elections which was supposed at one point of time to be a walk in the park for Hillary Clinton is now turning out to be a walk out of the Park as the events unfolding seem to suggest that Trump may after all Trump. Then again, after Brexit vote, calculations of rational thought by voters had gone down the drain.

As I write this, Nifty is down 3.6% – big but not really something that we haven’t seen in earlier times. With 85% of money in circulation suddenly being told to come back to base, one really has no clue how it will pan out. India is predominantly a cash based country and given that Rural India is where a lot of demand arose (from Automobiles to FMCG), the impact of this move will be seen only in months forward.

Most Asset Allocation tables I run were in Debt for 50% and while today is a buying opportunity, I am not going out and buying at any price. S&P 500 futures have closed since it breached the 5% limit, how US markets close today will dictate the future course for now.

Real Estate will get cheaper over time since the money that was floating around and changing hands over every deal will now be out of circulation (I have no clue how much money will not come back, but easy to estimate that a large number will find it tough to get back into the White mode). How will this impact on other sectors is something we cannot be sure about.

Could there be Job losses is a additional question to be asked, especially in jobs backed by the informal economy and how will that pan out in terms of consumer spending among others?

Remember, the financial crisis of 2008 was brought on by crash of housing prices which then started a shit storm that took a long time too cool. While we may not go through such a painful period, the next few months will be critical as one evaluates the impact and what it means.

While on the long term Equities will pay out, its times like these that provide one with opportunities that can enhance your total returns. Market even it falls further won’t fall in a straight line given that there will be a lot of Institution support, but unless you are ready and willing to take the risk at points where you believe its worth putting your bet, its just another opportunity that passes by.

So, whatever you do. Good Luck.