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Last Updated : Apr 20, 2018 02:28 PM IST | Source: Moneycontrol.com

No cash crunch on D-Street, investor wealth rose over Rs 6 trillion in April

Market capitalisation of BSE listed companies rose to Rs 150.58 lakh crore on Thursday from Rs 144.32 lakh crore on April 2, which translates to a rise of over Rs 6 lakh crore in market capitalisation in a matter of just 14 trading sessions.

Kshitij Anand @kshanand

The word ‘cash crunch’ gripped India all through this week when news about automated teller machines (ATM) turning dry in some parts of the country fuelled fears of Demonetisation 2.0. However, D-Street remain unfazed.

The Nifty reclaimed its crucial resistance level of 10,500 in April and the Sensex rallied over 4 percent, rising over 1,400 points so far this month. Market capitalisation of BSE listed companies rose to Rs 150.58 lakh crore on Thursday from Rs 144.32 lakh crore on April 2, which translates to a rise of over Rs 6 lakh crore in market capitalisation in a matter of just 14 trading sessions.

For the last few weeks, South Indian states including Telangana and Andhra Pradesh have reportedly seen ATMs go dry. They have now been joined by states like Bihar, Uttar Pradesh, Chhattisgarh, Gujarat, Delhi and Madhya Pradesh.

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Banking stocks remain unaffected by fears of a potential Demonetisation 2.0, which brought back memories of long queues outside ATMs. But experts feel the cash crunch is a local problem and that public sector banks are adequately capitalised.

Abhijeet Dey, Senior Fund Manager at BNP Paribas MF, feels the Street make take the cash crunch fears in its stride and not react. “We do not think the situation today is comparable with the period just after the demonetisation policy was announced. The crunch seems to be only in a few states for reasons which are not very clear.”

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The Reserve Bank of India has also issued a statement earlier this week stating that it has ramped up printing of currency at all four currency presses. It added that shortage in some pockets is due to logistical issues of restocking ATMs frequently.

Experts like Nikhil Kamath, Co-founder of Zerodha, feel RBI has taken enough steps to remedy the cash crunch and analysts’ do not see the possibility of this situation continuing for much longer.

“Banks seem to be adequately capitalised at the current juncture and hence do not see the possibility of a cash crunch. RBI has increased its currency printing capacity and we will soon be beyond this point,” Kamath said.

Stocks that rallied in April

Indian markets climbed the wall of worries in April to reclaim 10,500 levels on the Nifty and 34,000 on the Sensex. Over 400 stocks in the BSE 500 index have delivered positive returns. As against an about 4% rise in the Sensex in April, stocks in the BSE 500 index rose up to 50 percent so far in April. Stocks which have rallied up to 50 percent include Indiabulls Ventures, which rallied 54%, followed by JBF Industries (32 percent), and VIP Industries (26 percent).

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D-Street pared gains in April tracking trade war fears, US military action in Syria and rising crude oil prices. However, strong macro data and cool off in the US-China trade war concerns eased market jitters. “Markets witnessed an unprecedented fall in the March series due to weak global cues. In April series, worries of an ongoing trade war between US and China eased off to a great extent. Moreover, the markets rallied on the back of strong auto sale numbers and macro data such as IIP and CPI,” Soumen Chatterjee, HoR, Guiness Securities said.

Though FIIs have not actively participated, he feels that once they reverse course, markets will inch higher. “RBI’s forecast of strong growth and softened inflation has gone down well with the markets. Therefore, it can be concluded that this rally is due to consistent buying of retail investors and DIIs and not FIIs.”

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First Published on Apr 20, 2018 12:48 pm
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