Making a cash flow statement or net worth statement will become important for the salaried class now. If you are an investor, stay away from the stocks of jewellery and luxury goods companies, and invest in the BFSI sector
On Tuesday, Prime Minister Narendra Modi announced that Rs 500 and Rs 1,000 will be taken out of circulation. In this backdrop, we look at the top five sectors that will get affected by the decision and how you can take advantage of it.
Real-estate sector
The real-estate sector is likely to be hit very bad as all under-the-table transactions wherein the buyer could pay 20 per cent to as high as 80 per cent in cash and the remaining by cheque will not be possible now – especially till the time the new currency sets in. I hope that the government will come out with more rules to strike off this possibility in future also. At the moment, the move will surely hit the demand in property market and also decelerate property and real estate as investment opportunities.
Investment tip: Most stocks of real-estate companies have already fallen by 20% or so and the trend may continue to remain so. Overall, the property market may correct by 30% or so, depending upon the region. This is purely because all investors who used to convert black money via this sector cannot do so now. Now this sector will only attract genuine buyers and you will be in a great position to negotiate hard and get a good bargain. So delay your property investment for some time, be alert and stay smart to make a killing.
Gold & bullion market
Like the real-estate sector, gold is one option for converting black money. This sector depends heavily on cash transactions, but with the new move, this trend will stop. Stocks of jewellery firms and companies which makes luxury goods will correct big time, especially in the coming quarters. Most of the discretionary spending will come down and there will be a liquidity crunch. Transactions through unaccounted money will become difficult.
Investment tip: Stay away from stocks of jewellery and luxury goods companies – at least in the next few quarters.
Banking and financial sector
This sector is likely to benefit the most as lot of deposits will be made in banks. A lot of cash will be pumped in and the use of debit and credit cards will immensely increase for the time being. Net banking facility will also add up to bank revenues. Financial services will be the need of the hour for each and every individual, especially for the business community.
Investment tip: Though it is too early to comment, it seems time has come to buy banking stocks rather than depositing money in banks. Also, invest in good mutual fund schemes as most diversified MF schemes have around 20-25 per cent minimum allocation in the Banking, Financial Services and Insurance (BFSI) sectors.
E-commerce companies
The E-commerce industry, specifically companies like Paytm, Oxygen etc. Wallet companies will increase their market share.
Investment tip: - Smartly use these wallets as these companies are spending or rather burning lots of money on acquiring clients. Hence, you will keep getting insane offers. Make the most of it because if their business will grow, so will be their offerings. Use your wallets smartly.
Stock markets
Commodity transactions and transactions in the general cash market will feel the heat immediately. Equity markets are likely to react negatively, albeit for a short term. But reactions can be unpredictable at this stage and we need to wait and watch.
Investment tip: Invest in mutual funds. If you are a regular direct investor in equity markets, wait for a correction and invest in the right, fundamental stocks. I would advise investors to shift their cash or FDs or savings in bank accounts and invested then via the STP route of mutual funds. Invest in diversified mutual fund schemes via STP and start a SIP right away. Make the most of it.
(The author is Chief Gardener, Money Plant Consultancy)
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