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White draws red on St

Markets wobble on government's quest to turn black money into white in India and Donald Trump becomes US president on pro-Whites agenda

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A broker reacts to market fall in Mumbai on Wednesday
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In a double whammy of two unexpected events -- one global and another national -- played out within a span of about five hours, sending jitters down on domestic financial markets during the initial trading hours.

But as the dust settled by mid day, investors shrugged off the uncertainties arising out of curb on domestic currency and Donald Trump winning the US Presidential elections and came back to the markets waking up to the positive side of both these developments.

As markets opened, Sensex, reacting to Tuesday evening's cash curb, slumped 1,600 points, its biggest percentage drop since August 25 with all indices, sectors and stocks in deep red, led by sectors where products are mostly bought in cash like real estate and related industries like cement and constructions and also cars and motorbikes.

But even as investors and analysts were scratching their heads trying to figure out what would be the long-term impact of this development, markets made an unexpected recovery even as another news broke -- Donald Trump emerging the next US president. But after hitting a low of 26,503 points at around 10.30 am, Sensex staged a smart recovery, closing with a loss of just 338.61 points or 1.2% at 27252.53 while fall in Nifty was restricted to 111.55 points or 1.3% at 8432. "The disruptive nature of PM Modi's overnight announcement caught markets by surprise, and deflated sentiments which were already on a low following global cues, and the clamp down's effect was more seen in the realty sector where cash is still king. However, markets soon appreciated the long-term positives of the drive, which was followed by a value buying across the board, staging a vertical recovery from the day's lows," Anand James, chief market strategist, Geojit BNP Paribas Financial Services, said.

While the markets were dragged down may by real estate and IT sectors – casualties of currency curb and Trump win respectively - the recovery rallies were also aided by pharma stocks which jumped on the assumption that the new regime in the US may be less disruptive.

Another reason for the recovery was what Alok Rajan of Way2weath on Tuesday evening told DNA Money that the curb on higher denominated currencies would be seen by foreign investors as a key step by Narendra Modi government in curbing corruption in India and would led to a long-term upgrade by global institutional investors.

Realty sector, where the boom till recently was fueled by channeling of unaccounted cash, suffered the most.Sector biggie DLF fell 17.47% while smaller players crashed in varying degrees from Sunteck Realty (19.91%), HDIL (16.66%) to Kolte Patil (10.55%). IT sector, apprehensive of a backlash following Trump win, survived the news with Infosys recovering from a low of Rs 920.05 to Rs 963, a drop of just 2%.

TCS, on the other hand, failed to shrug off the initial jitters, recording a drop of 4.27% during the day ending at 21.85.80, mainly due to the overhang of stake sale in the company by promoters, analysts said. Global markets mimicked Indian market moves: a sharp gash followed by a fast recovery. Britain's FTSE 100 plunged 2%, or 140 points, at the open but was down by just 0.08%.

"We think this volatility only gives an opportunity to long-term investors to commit more money to their equity investment as long-term opportunity in India looks very promising to us. The banning of large denomination currency may be a bit painful in the shorter term but definitely better for long-term in terms of better tax compliance, control or corruption as well as inflation," Motilal Oswal, chairman of Motilal Oswal Financial Services, said.

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