Demonetisation of high value currency will bring “a behavioural change” in the economy and the pain due to cash crunch will be a non-event by 2018, said Mohnish Pabrai, Managing Partner at Pabrai Investment Funds and Dhandho Holdings.
“Indians will adapt to an economy with scarcity of cash and demonetisation will result in a behavioural change.
“There will be a segment of the population that will realise that it is better to play within the system,” he said.
This would have huge positive impact in the long run, he said in an interview with BTVi.
“..Demonetisation is short term pain and long term gain. It is a very positive move for India. I think to some extent there are positive unintended consequences.
“I do not think the government fully realised …the degree to which we are going to go digital,” he said.
He said “the pain” due to cash crunch that people are going to feel in Q4 (fourth quarter) and perhaps rolling into early part of 2017 will be “a non-event by 2018 and beyond”.
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Pabrai said investors would be better off by not focusing on macro factors.
Pabrai added that Prime Minister Narendra Modi understands he may end up as the net loser after demonetisation and he did it for the good of the nation.
He also said that there would be a political impact and it might change people’s vote preference and he also felt that the shift to digital transaction enabled small businessmen to better handle finances.
Talking about investments in stock markets, he said low prices of equities were a cause to rejoice because net buyers of equities benefit from lower share prices and buyers should welcome recent changes in world economics.
“Indian blue chips in the long run will do really well,” he said.
The key is to assess future business of the stock and take advantage of price fluctuations. The patience and analysis of companies is key to investing, he added.
“India has the odds very heavily in its favour to deliver much higher returns than the US markets can deliver,” Pabrai said.