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Informational Content of Indian Demonetisation for Sectoral Indices

Journal of Commerce and Accounting Research

Volume 8 Issue 3

Published: 2019
Author(s) Name: Narain, Asha Rani | Author(s) Affiliation: Assistant Professor, Faculty of Management Studies, University of Delhi, New Delhi, India.
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Abstract

The present work tries to study the degree and direction of the impact of the demonetisation move of the Central Government in India announced on the eve of November 8, 2016 on various sectors of Indian economy proxied by their barometers in the stock markets of the country. Using event study methodology with parametric and non-parametric testing, it was observed that the impact of demonetisation of High Denomination Currency Notes (HDCNs) was not evenly distributed in the Indian economy. As intended, the move had a foremost impact on the Reality sector which experienced the highest fall of over 12% on the next trading day after the announcement among all the 41 sectors studied in this article. While the IT sector and two business houses could recover to the early losses, few vital sectors succumbed to the overall negative sentiment. These sectors, Food & Agro-based Products, FMCG, Textiles, Small Cap 50 and India Manufacturing, have larger ramifications for the informal sector of Indian economy affecting employment, sustenance and economic activities.

Keywords: Demonetisation, Sectoral Index, Event Study

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