How Scrapping Of 500 And 1000 Rupee Notes Affects You?

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500-scrapped.jpgYes, the 500 RUPEE NOTES and 1000 RUPEE NOTES ARE NO LONGER LEGAL TENDER IN INDIA, AS OF NOVEMBER 8TH 2016,   12 AM.

Yes….the citizens of India, are tired of black money and the great Indian Prime Minister, Narendra Modi, has obliged with a move, that has sent shock waves across the Nation. Five hundred and thousand rupee notes, have already been scrapped as we speak.

Property prices to come crashing down?

Property prices across all major cities may go down by at least 20% in the next couple of weeks.

In India, between 10% to 80% of the value of property bought or sold, is in cash. At least one third of India’s black money transactions, are in real estate.  Yes, your apartment/property/plot of land, would definitely lose value in the short term. Expect prices of property and real estate, to come down in the medium term. When it comes to buying and selling plots of land, apartments, houses, villas…everything’s in cash and everything’s in black and everything’s in 500 and 1000 rupee notes.

Impact on property:

Expect property and land prices to come down, as investors can no longer dump black money in 500 and 1000 rupee notes, in property. Builders have no choice but to lower prices.Affordable housing will remain unaffected by this move. Time for your dream home? Good honest tax payers remain unaffected.

Gold prices to crash?

Expect gold prices to come down in the short term. Indians are the World’s largest consumers of gold and gold prices could

The reason….500 RUPEE NOTES and 1000 RUPEE NOTES ARE SCRAPPED AS OF NOVEMBER 8TH 2016    12 AM.

Yes, you heard me right…. As we speak, the 500 and 1000 rupee notes are no longer, legal tender. India imports close to 1000 tonnes of gold a year. Indian households have more than 20,000 tonnes of gold. Many of our citizens love gold and show their affection, by parking black money in gold. Black money in 500 and 1000 rupee notes, is dumped in gold.

Why is black money dumped in gold?

Simple…it’s easy to do so. Very difficult to track. No paper trail. Citizens are rushing to gold jewelers, to convert their black money into gold. Jewelers have hiked prices to take advantage.

Impact on gold prices:

Gold jewelry purchases are going to get really hit. Curbing of 500 and 1000 rupee notes in gold purchases will mean….very good disclosures. Purchases of gold and gold jewelry above INR 2 Lakhs,  requires permanent account number (PAN). While black money can no longer be used to purchase gold jewelry, (yes…most gold jewelry purchases  are in 500 and 1000 rupee notes)….prices of gold will come crashing down, especially in the short term.

Money will flow into the economy and go for the development of the country

I estimate about 15 to 20 lakh crores of Indian Currency which is currently in circulation may not come back even after 31st March 2017, which eventually will be available for developmental works since RBI can print so much extra.

What does all this mean….I can’t understand. Let me explain.

RBI (Reserve Bank of India)…prints rupee currency notes in India, of all denominations. The Government has the final say on this. So why can’t RBI simply print any amount of rupees and make India rich?

Let’s say you have 100 Kgs of gold. You have 10 members in your family. You want to distribute 10 Kgs of gold to each family member. Instead of giving your family members physical gold, you give them a coupon.

1 Coupon = 10 Kgs of gold. 10 Coupons = 100 Kgs of gold.

Now even if your family members get married and bring in 10 new members, gold you have still remains 100 Kgs. You simply print new coupons and give them to 10 new members. Now each coupon is worth 5 Kgs of gold. RBI prints rupee currency notes, on pretty much the same principal. Just think of coupons as rupee currency.

Impact on economy:

Black money is illegal…no doubt. But, 500 and 1000 rupee notes, are not forged. They can still be exchanged at banks and post offices, till December 30th 2016. In extreme cases you can deposit these notes with RBI, till March 31st 2017. Just submit a declaration form with identity proof.

It’s obvious…Black money in 500 and 1000 rupee notes, will not be deposited in banks and with the RBI. All illegal money used for terrorism, corruption, smuggling and earned in illegal ways, as well as black money hoarded, will lose value. This money will be destroyed…This gives RBI the chance to print new currency notes. This new money will flow into the economy and used for development works.

Good for stock markets

In the short term, stock markets could fall. Markets could see a correction. However, over the long term, this could be a good move for the stock markets.

  • Expect real estate stocks to get hammered.
  • Shares of smaller Companies, used to launder money, in big trouble.
  • Expect a correction in consumption stocks.

 Impact on stock markets:

This is the time for Equity investors to Invest in Stock Market, since stock market is expected to rise sharply as more money will get into formal financial system. You would be able to buy stocks of reputed Companies with good fundamentals and also invest in good equity mutual funds, as stock prices fall in the short term. With fixed deposits and small savings schemes rates down, this could be good for you. With good legal money flowing into stock markets, stock markets will go up and you could see bumper profits.

We live in great times. Expect some interesting things to follow

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