There seems to be a structured and comprehensive effort from the government's side to attack black money whether it is in the form of demonetisation or benami or in the form of treaties with Mauritius, Singapore, etc. So you put all that together, it basically means that a large amount of money which was moving into financial savings, physical savings from the informal or black sector will start moving into the formal financial sector which effectively means it has to come into banks, mutual funds and the like. Structurally, the India story has got ten even stronger with the kind of initiatives taken by the government.
From a business angle, we will have a lot of informal sector seeding market share to the formal sector. Whether it is a paint company or a tile company in the informal sector, the ability to do business is going to be hampered and they are going to lose market share to the formal sector which essentially means the earnings and sales of companies in the formal sector which are listed is going to go up which is a good thing from a longer term perspective for earnings. Budget is also said to be in early February. Good announcements are expected in the budget too.
Global markets are also volatile right now and will remain so for some time. Fed is signaling a rate hike in December and this could lead to fight of capital in the market. Italian referendum is scheduled on December 4, hence the future of the euro is uncertain too. Overall, things will settle down after Trump takes over and around February-March we will have clarity on their policies.
The author, Lalit Nambiar is Head of Research, EVP and Fund Manager of UTI Mutual Funds.