Lauding PM Narendra Modi for his move on demonetisation, Chris Wood, equity strategist, CLSA on Tuesday told ET Now that demonetisation is a short-term pain for a long-term gain and indicates that Modi is reform-oriented. “Long term benefits of demonetisation are huge for India. It will increase deposit growth for banks. It is fundamentally a positive move,” he said. “Expect three rate cuts from RBI in next 12 months,” he added.
Prime Minister Narendra Modi last week announced demonetisation of Rs 500 and 1000 currency notes with effect from midnight, making these notes invalid in a major assault on black money, fake currency and corruption. In his televised address to the nation, Modi said people holding notes of Rs 500 and Rs 1000 can deposit the same in their bank and post office accounts from November 10 till December 30. However, he said that all notes in lower denomination of Rs 100, Rs 50, Rs 20, Rs 10, Rs 5, Rs 2 and Re 1 and all coins will continue to be valid.
Yesterday, the central government granted an exemption to “certain category of transactions” where old series of Rs 500 and Rs 1000 notes can be accepted. “The limit for such transactions is being extended from 14th November midnight to 24th November midnight,” Economic Affairs Secretary (EAS) Shaktikanta Das said. The old notes will be accepted at government hospitals, petrol bunks among others. Das said that RBI assured him that there was enough cash available for circulation in the system. Das also said that there will be separate queues for those visiting banks to swap old notes. Separate queues for senior citizens and “divyang” will also be implemented to ease the process of swapping currency.
When asked about Trump’s victory in the US presidential elections Wood said, “Trump victory has triggered sell-off in US bond market. Investors are focused on dramatic pro-growth policy by Trump.” He further said that he is surprised by rally in Dollar Index post his victory as he had expected it to fall.