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Jesus replied: “ ‘Love the Lord your God with all your heart and with all your soul and with all your mind.’ This is the first and greatest commandment. And the second is like it: ‘Love your neighbor as yourself.’ All the Law and the Prophets hang on these two commandments.” Matthew 22:37-40

23 Dec 2017

STOCK MARKET- Markets feel absence of 'illegitimate money,' honest pricing of the stocks may be the next

Suddenly last few days since announcement on demonetisation was made on live television by none other than country's Prime Minister, stock markets in India have been witnessing a significant fall in the volume of transactions. While some of the genuine retail investors have been shying away from taking fresh positions, a large number of 'dabba traders,' have now gone underground thus disappearing from making themselves available in the markets. An immediate result which is being felt--drastic fall in volume in the equity transactions. According to sources in the markets, many of the high-volume traders and other investors who settle their trades with their respective brokers in cash to avoid paying taxes, have reduced their transaction volume significantly fearing a crackdown by the taxmen. Also ongoing strong rumours on various possible crackdown operations apparently being thought in the corridors of power in Delhi, have led to further drop on transactions. In fact, sources tell us, the Finance Ministry along with the market watchdog, SEBI have put lakhs of DEMAT accounts under scanner due to heavy and unusual transactions during last few weeks, even before demonetisation move was made public.

The fight by the Centre against the black money menace has reduced liquidity in the markets to a significant extent. The bourses have reacted to the liquidity crunch in the last two trading sessions. The BSE Sensex has lost almost 1,200 points while the S&P Nifty has shed close to 400 points due to this radical move of the Central government. Angadiyas (local couriers) have also stopped their activities significantly thus hardly any cash ferrying activities are taking place across the country--while some are unhappy with the steps taken by the government, regular tax-payers have reasons to celebrate these days. It is expected markets to behave rangebound once the cleansing operations gets over in next one quarter or so and also honest prices for the stocks will be revealed thus bringing more retail investors in the markets who have been cheering the government move in recent times. The bubble has to burst be it in the equities of real estate sector--and with the announcement by the PM on the night of November 8, seems, the first phase towards bursting the bubble has been taken by the government. At least it has created enough panic leading to much scare among the 'wrong-doers' in the markets. A fall in the volume and fall in stock prices can be handle for now--an honest market is what the retail investors in this country deserve. Scaring away the 'dabba traders' is one of the good things which markets have recently witnessed. Watchers believe, there are more to come and retail investors really do not have reasons to panic even in case of a sharp fall. 

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