We expect the market to overlook significant but short-term growth disruption for most sectors. However, asset quality impact on microfinance/non-banking financiers could last longer. Further, it may take many years for currency in the black market to replenish, hurting real estate/land transaction volumes.
Neelkanth Mishra
MD-equity research, Credit Suisse
We regard this as a positive move for the economy and long-term growth. The government is cracking down on black money, while the implementation of GST will ensure more tax compliance and reduce the amount of money in the shadow economy. However, it will be disruptive in the short term, as India is largely a cash-driven economy.
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Devendra Joshi
Strategist-Asia Pacific, HSBC
The current round of demonetisation is likely to disrupt the small business ecosystem in the near term, as the segment operates largely in cash. We see challenging times for real estate, small businesses and commercial vehicle finance. We don’t see non-performing loan risk for consumption businesses but retail demand, especially for housing, may slow down.
Nischint Chawathe
Financial analyst, Kotak Institutional Equities
Demonetisation of 86 per cent of currency in circulation will have significant short-term shock on most sectors. Demand curve is expected to remain weak in the medium term. Private investment should weaken further; a deflationary environment will require more monetary and fiscal intervention. Rate cuts may be on the way, but that can’t help change risk aversion in the short term.
Govindarajan Chellappa
MD- head of India research, Jefferies
The causes for disruption in financing activity would vary across segments ranging from deceleration in consumption demand, concern about decline in collateral values and inability to provide an alternative payment mechanism when availing loans. These factors will likely affect near-term growth prospects. Timeline for restoration of normalcy is less clear, for now.
Sampath Kumar
Head-banking and financial services research, IIFL Capital
