Pacific Business Review International
Volume 10 Issue 3, September 2017
A Study on Impact of Demonetization on Indian Stock Market and
Selected Sectors of Indian Economy
Ashok Bantwa
Assistant Professor,
Faculty of Management,
GLS University, Ahmedabad,
Gujarat.
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Abstract
While addressing India in his historical speech on 8th November,
2016, prime minister of India, Narendra Modi announced that two
highest denomination currency notes in India (500 rupee notes and
1000 rupee notes) will not remain legal tender. Demonetization is one
of the most remarkable decisions of Indian government aimed at
eradication of black and counterfeit money and control of terror
funding. This decision is expected to bring significant change in mode
of payment used by Indian people and will transit India towards the
cashless economy. Undoubtedly the exact impact of demonetization
on Indian economy can be figured out only in long run but in short run
demonetization has considerable impact on people, businessmen,
small and medium scale industries, companies and economy. This
paper examines the impact of demonetization decision on Indian stock
exchange as represented by NIFTY index of National Stock Exchange
.The paper further examines the impact of demonetization decision on
various sectors of Indian economy as represented by various sectoral
indices of National Stock Exchange. These sectors include
Automobile, Banking, FMCG, Information Technology, Media,
Metals, Pharmaceuticals, Real estate, Infrastructure, Private sector
banks, Public sector banks, Financial services and Service sector. The
result of this study indicated that demonetization has statistically
significant impact on all the indices under study. Considering the
absolute percentage change in closing price of indices within 30 days
of demonetization decision, demonetization has negative impact on all
the indices except IT index. Except media index and pharma index the
volatility of all other indices under study has increased considerably
due to demonetization. Average closing price of NIFTY for 30 days
after the demonetization is 5.78% lower than the average closing prices
for 30 days before the demonetization. The absolute fall in NIFTY after
one month of demonetization is 5.64%. Among the sectoral indices the
highest impact of demonetization is on real estate sector followed by
media and automobile sector whereas the lowest impact is on metal
index followed by PSU banks and IT sector.
Keywords: Demonetization, Black Money, Liquidity Crunch
Introduction
Demonetization is an act of stripping a currency unit of its status as
legal tender. The old currency unit is superannuated and replaced with
new currency unit. There might be multiple reasons behind the
demonetization of local currency unit. Few objectives of
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demonetization include fighting inflation, fighting
corruption and discouraging cash system. Technically
demonetization is a liquidity shock, a sudden stop in terms of
availability of currency that is expected to disturb the
economic activities. The inadequate supply of currency is
expected to hamper consumption, production, investment,
employment etc.
In year 2015 government of Zimbabwe decided to
demonetize Zimbabwean dollar to fight with the problem of
hyperinflation that was hovering to 231, 00,000%. The
process that lasted for three months involved purging the
Zimbabwean dollar from the financial system of the country
and to strengthen the other currencies including US Dollar,
South African Rand and Botswana Pula as a country’s legal
tender in a bid to stabilize the economy. Another example of
demonetization occurred in year 2002 when Euro was
adopted as common currency by the nations of European
Monetary Union. To switch to Euro zone authorities first
fixed exchange rates between various national currencies
and Euro. With introduction of Euro the old currencies of
various nations of European Monetary Union were
demonetized. However to ensure smooth transition through
demonetization the old currencies were kept convertible
into Euro for a specific period. In 1929 US federal Bank has
removed 30% of money in circulation. This decision of
federal bank resulted into great depression from 1929 to
1933. Historically the earlier Indian governments also
demonetized currency notes. In January 1946, currency
notes of Rs.1000 and Rs.10,000 were withdrawn and new
currency notes of Rs.1000, 5000 and 10,000 were
introduced in 1954. In order to fight with counterfeit money
and black money the Janta Party coalition government had
again demonetized currency notes of Rs.1,000, 5,000 and
10,000 on January 16, 1978.
While addressing India in his historical speech on 8th
November, 2016, prime minister of India Narendra Modi
announced that two highest denomination currency notes in
India (500 rupee notes and 1000 rupee notes) will not remain
legal tender. The demonetization decision was announced at
midnight on November 8. Through this decision nearly
86% of the currency in circulation was withdrawn. This
historical decision was aimed at manifold objectives like
curbing black money, eradicating counterfeit currency
notes, combating terror financing, controlling tax evasions
and a shift towards cashless economy. The decision was
further aimed at bringing more people under formal banking
system. According to Reserve Bank of India’s annual report
for the period April 2015 to March 2016, the total value of
currency notes at the end of March 2016 was 16.42 Indian
trillion rupees. The 500 and 1000 currency notes consisted
of 86.4% of total value of currency in circulation. RBI
database also indicates that at the end of March 2016, total 6,
32,926 fake Indian currency notes were in circulation. The
withdrawal of Rs. 100 and Rs. 1000 currency notes resulted
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Pacific Business Review International
into huge gap in currency composition as after Rs.100,
Rs.2000 is the only denomination. It would not be a
hyperbole that demonetisation announced by the Prime
Minister of India have been one of the largest self-inflicted
macroeconomic shocks on a country in the absence of a
short term crisis. Such a large and unexpected policy change
naturally carries with it a large collateral damage at least in
the short run. This is particularly true for India where a large
section of the economy is comprised of the informal or
unorganized sector (not registered with the government and
hence not subject to taxation) which functions on cash, but is
not illegal.
The demonetization would be a memorable experience of
this generation and is going to be the most remarkable event
of our times. The decision is expected to have far reaching
impact on India Economy. However during the days
following demonetization banks and ATMs across the
country have witnessed long queues of people struggling to
exchange their old currency notes and withdrawing scarcely
available new currency notes. People across the country
have witnessed the acute shortage of new currency notes
from ATMs and banks. Many tried to save their dying cash
by making investment in gold whereas many relied on their
near and dear ones to transfer their unrecorded cash piled at
their home. Demonetization resulted into several
detrimental effects on small businesses, workers, laborers,
shopkeepers, agriculture and transportation. Reacting
strongly to the announcement of demonetization decision
two major stock market indices in India BSE SENSEX and
NSE NIFTY 50 plunged sharply for two days. At an
aggregate level, this move will significantly eliminate the
existing stock of black money, fake currency and will benefit
the economy in the medium- to long-run, but, the question as
to how the creation of black money in the future will be
prevented still remains unanswered.
Reviews of Literature
The effects of demonetization is an unexplored and
untouched topic by researchers. Furthermore the
demonetization in India is of very recent time so no good
number of studies have been conducted on this topic. This
results in scarcely available reviews of literature for the
topic under study. However I referred to the following
literature available about the demonetization.
Sunita (2014) undertook a study to understand the reasons
and steps taken by the government on the major
demonetizations that took place in India. The study was
further aimed at examining the implications of depreciation
of rupee on Indian economy. The author also studied the
impact of depreciating rupee on Indian economy and
concluded that in long run with weakening rupee, Indian
economy has more to lose and less to gain. The paper also
threw light on the importance of the central bank’s
intervention to control the situation.
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Volume 10 Issue 3, September 2017
Chatterjee and Banerji (2016), discussed the general impact
of demonetization on Indian economy and specific impact
on various sectors. As per them the demonetization of 500
and 1000 notes will have significant and immediate impact
on Indian economy. Demonetization resulted into increase
in bank’s deposit level due to more number of deposits with
banks. Further financial savings are expected to increase as a
result of shift from unproductive physical asset based
savings to interest bearing financial assets. This in turn is
expected to increase the banks liquidity position, which can
be leveraged by them for lending purposes. As the
demonetization is expected to result in low preference for
informal funding sources, the real estate sector is expected
to have an adverse impact in terms of demand. Luxury
property rates are expected to fall as result of fewer
purchasers with substantial liquidity. The demonetization
measures are also expected to affect the cash transactions in
Automobile Industry, predominantly in auto ancillary and
two wheelers industry.
Rao Kavita and Mukherjee Sacchidananda, (2016)
evaluated short and medium run impact of demonetization
on economy through a working paper. They opined that the
impact of demonetization would depend upon the extent to
which government decides to go for remonetization. The
paper throws light on the impact of demonetization on
various factors like availability of credit, level of activity,
spending and government finances. They concluded that the
demonetization is a large shock for the economy and the
medium term impact of this shock will depend upon the
extent to which currency is replaced by the government and
the extent to which currency in circulation is extinguished.
Further they stated that extinguishment of huge portion of
exiting currency would result in contraction of economic
activities and that would be the material cost that need to be
considered while evaluating the impact of demonetization.
They also emphasized on acute need for significant up
gradation of banking system and telecom infrastructure that
would serve as backbone for digital transactions and
behavioral change in people to adapt the substitutes of cash
for both making and receiving payments.
Sabnavis, Sawarkar and Mishra (2016) in their report on
economic policy review of CARE ratings they highlighted
the probable consequences of demonetization decision on
different economic variables and entities. Talking about the
impact on parallel economy they opined that the decision
will eradicate the huge chunk of black money and
counterfeit money from the economy and will significantly
curb the funding for the various anti-social activities like
terrorism, smuggling, espionage etc. Explaining the impact
on overall demand they expected the large contraction in
overall demand and particularly in sectors like consumer
goods, real estate, automobiles etc. They further forecasted
improvement in liquidity position of banks, which can be
leveraged for lending purposes. It was further observed that
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with cash transactions facing reduction, the alternative
forms of payment will experience sharp increase in demand.
Litwack M. John (2000) studied the causes and impacts of
demonetization in Russia in his paper titled “The
Demonetization of Russian Economy: causes and policy
options”. They stresses two primary structural factors that
have contributed to demonetization: the conditions under
which natural monopolies and subnational administrations
operate in the Russian Federation. The former causes are
related to the particular status of natural monopolies as
quasi-fiscal organizations in Russia. The demonetization
process can be understood largely as a consequence of the
combination of these factors, the tightening of monetary
policy, and administrative increases in relative prices of
natural gas between 1994-98.
Rationale for study
Overnight, on the orders passed by our Prime minister
Narendra Modi all Rs.500 and Rs.1000 currency rupee notes
in circulation that consisted near about 86% of currency in
circulation were declared obsolete. This decision seemed to
catch everyone on hop. The decision is being flaunted as a
surgical strike on black money and counterfeit money aimed
at breaking down the parallel economy running on
unaccounted cash accumulated through tax evasion. The
decision was expected to have a significant impact on Indian
economy in general and on various sectors of Indian
economy in particular in short, medium and long run.
Though the long term impact of the decision is to be
observed in times to come, this paper is aimed at studying
the impact of demonetization decision on Indian stock
market and on various sectors of Indian economy, over the
period of one month since the demonetization decision was
announced. The paper examines the impact of
demonetization decision on Indian stock exchange as
represented by NIFTY index of National Stock Exchange.
The paper further examines the impact of demonetization
decision on various sectors of Indian economy as
represented by various sectoral indices of National Stock
Exchange. These sectors include Automobile, Banking,
FMCG, Information technology, Media, Metals,
Pharmaceuticals, Real estate, Infrastructure, Private sector
banks, Public sector banks, Financial services and Service
sector.
Methodology
This paper examines the short term impact of
demonetization decision on NIFTY and various sectoral
indices over the period of one month from the
announcement of demonetization decision. Impact of
demonetization on NIFTY and various indices is studied by
comparing the data of closing prices of these indices for 30
days before(26th September 2016 to 7th November 2016)
and 30 days after (9th November 2016 to 21st December
2016) the demonetization decision. The paper also study the
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impact of demonetization decision on the volatility of Hypothesis

various indices by comparing the volatility for 30 days
The following hypothesis have been made and tested using
before and 30 days after the demonetization decision. To
the paired t-test
study the statistical significance of the impact of
demonetization decision paired t-test is used. Paired t-test is H0: There is no significant difference between average
a way to test for comparing two related samples, involving closing price of index for 30 days before and 30 days after
small values of ‘n’ that does not require the variances of the the demonetization decision.
two populations to be equal, but the assumption that the two
H1: There is significant difference between average closing
populations are normal must continue to apply.
price of index for 30 days before and 30 days after the
Symbolically,
demonetization decision.
Empirical findings and Analysis
The paper further examines the impact of demonetization on
This section of paper covers empirical findings and analysis
above indices for the period of one week, two weeks, three
of the topic under study. The demonetization was one of the
weeks and four weeks from the date of announcement of the
bold decisions expected to have significant impact on Indian
decision. The data of closing prices of various indices under
stock market and various sectors of Indian Economy. The
study has been collected from the website of national stock
market responded strongly to the decision.
exchange.
Table – 1 – Impact of Demonetization on various indices under study
Indices Change in Index Level Change in Volatility
30 Days 30 Days % Change Absolute % 30 Days 30 Days % Change
Average Average in average Change from Volatility Volatility volatility
(Before) (After) Nov 9 to Dec (Before) (After)
21
NIFTY 8647.76 8148.15 -5.78 -5.64 93.30 122.24 31.02
Auto 10107.65 9062.88 -10.34 -10.58 140.06 252.01 79.93
Bank 19447.63 18621.04 -4.25 -7.26 244.14 507.30 107.79
Fin Services 8012.60 7540.63 -5.89 -8.59 101.48 170.34 67.85
FMCG 21603.87 20300.55 -6.03 -9.55 239.98 416.17 73.41
Infrastructure 2842.00 2735.43 -3.75 -2.68 38.11 40.12 5.27
IT 10226.18 9862.69 -3.55 2.20 172.41 273.53 58.64
Media 2961.48 2612.67 -11.78 -10.79 82.56 79.28 -3.98
Metal 2642.37 2742.71 3.80 -1.15 71.82 81.56 13.56
Pharama 11467.02 10839.79 -5.47 -2.85 257.01 212.84 -17.19
Private 10861.38 10269.42 -5.45 -9.00 145.25 295.46 103.41
Banks
PSU Banks 3149.59 3196.51 1.49 -0.42 69.46 99.83 43.72
Real Estate 206.63 165.31 -19.99 -15.41 4.62 4.76 2.97
Service 10957.99 10390.27 -5.18 -5.23 126.75 147.57 16.43
Sector
Source: NSE website
Chart – 1 – Percentage change in various indices over the period of 30 days

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Volume 10 Issue 3, September 2017

Chart 2 Movement in various common size indices

Source: NSE website

Chart 3 Percentage change in various indices over the different time periods

Source: NSE website

Table 2 Result of paired t-test
Indices Calculated Tabudlated P-Value Result
Value Value
NIFTY 19.16 2.05 0.00 Null Rejected
Auto 17.85 2.05 0.00 Null Rejected
Bank 9.23 2.05 0.00 Null Rejected
Fin Services 16.05 2.05 0.00 Null Rejected
FMCG 18.45 2.05 0.00 Null Rejected
Infrastructure 11.76 2.05 0.00 Null Rejected
IT 4.50 2.05 0.00 Null Rejected
Media 15.30 2.05 0.00 Null Rejected
Metal -5.48 2.05 0.00 Null Rejected
Pharama 13.90 2.05 0.00 Null Rejected
Private Banks 10.99 2.05 0.00 Null Rejected
PSU Banks -2.23 2.05 0.03 Null Rejected
Real Estate 33.44 2.05 0.00 Null Rejected
Service Sector 16.20 2.05 0.00 Null Rejected

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Table 1 summarizes the impact of demonetization on NIFTY
(Representing Indian Stock Market) and various sectoral
indices (Representing various sectors of Indian Economy)
by comparing average closing prices for the period of 30
days before and 30 days after the announcement of
demonetization decision. It also depicts the impact of
demonetization on volatility of NIFTY and other sectoral
indices. Chart 1 portrays the absolute percentage change in
closing prices of NIFTY and various sectoral indices after 30
days from the date of announcement of demonetization
decision. Chart 2 represents the movement in various
common size indices over the period of 30 days before and
30 days after the demonetization decision. For this purpose
all the indices under study are converted into common size
indices by taking the closing price of 26th September as base
price. All indices are converted into common size by taking
base of 100. In order to study the statistical significance of
the demonetization’s impact on various indices, paired t-test
is conducted. Table 2 depicts the result of paired t-test.
Impact on NIFTY
NIFTY index is considered as barometer of Indian economy.
Demonetization is expected to have an adverse impact on
overall economic activities. During the aftermath of
demonetization severe cash crunch has been experienced by
people, small businessmen, small and medium scale
industries as well as by large companies. Reduced liquidity
caused a sharp decline in availability of disposable income
that resulted into sharp fall in demand of various products
and put the economic activities on hold. Because of this,
demonetization was expected to have an adverse impact on
stock market. Data shows that as expected, NIFTY
responded adversely to demonetization. Average closing
price of NIFTY for 30 days after the demonetization is
5.78% lower than the average closing prices for 30 days
before the demonetization (Refer to table 1). The absolute
fall in NIFTY after one month of demonetization is 5.64%.
Demonetization also made NIFTY more volatile. The
volatility for 30 days after demonetization is more than the
volatility before, by 31.02%. Chart 3 shows that the impact
of demonetization on NIFTY diluted gradually over the
period of second and third week. Result of paired t-test
indicates that at 5% significance level the impact of
demonetization on NIFTY is statistically significant. Based
on above it can be said that demonetization has significant
negative impact on NIFY for short term of one month.
Impact on Auto Sector
In terms of impact of demonetization on Automobile
industry of India it was expected that the demonetization
will adversely affect the cash transactions in Indian
automobile industry especially for two-wheelers and used
car market where most of transactions are cash driven.
Further it was expected that demonetization will have
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Pacific Business Review International
significant impact on automobile sector in rural and semi
urban regions that caters mostly to two-wheelers and used
vehicle markets. As expected, Auto Index of NSE responded
negatively to the announcement and average closing price
during 30 days post demonetization fell by 10.34%. Among
all the indices under this study the third largest negative
impact is one auto index. Absolute decline in auto index after
one month of announcement is 10.58%. As in case of
NIFTY, the extent of impact on auto index also declined
gradually after one week. The volatility of Auto index
increased by 79.39%. At 5% significance level I failed to
accept null hypothesis, this indicates that demonetization
had statistically significant impact on Auto Index of NSE
over the period of one month.
Impact on Banking Sector
Demonetization resulted into large deposits of Rs. 500
and Rs.1000 rupee notes with the Banks. Many people have
also deposited their black money with the banks to convert it
into white money. It was expected that demonetization will
bring large amount of cash in circulation within the purview
of formal banking system through deposits. Huge inflow of
deposits in banks was expected to improve liquidity position
of banks, which can be leveraged by the banks for further
lending purposes. This entire move was expected to benefit
banks by reducing its dependence on high cost borrowings.
However in short run Banking sector index of NSE
responded negatively to demonetization as evidenced by
4.25% decline in average closing prices for 30 days after
demonetization and an absolute decline of 7.26% after one
month of announcement. Contrary to NIFTY and Auto
index, the impact on banking index has increased gradually
during second and third week. The volatility of banking
index increased by 107.79%, this is the largest increase in
volatility among the selected indices for this study. At 5%
significance level the impact on banking index is
statistically significant.
Impact on Financial Services
Due to liquidity crunch and panic among the investors it was
expected that there would be short run downfall in demand
of financial and investment products. Led by this financial
service index of NSE experienced sharp decline of 8.59%
over the period of one month of demonetization. Average
closing price for 30 days after the demonetization is lower
than average closing price for 30 days before
demonetization by 5.89%. The extent of volatility during
post demonetization has increased by 67.85%. As in case of
banking index the extent of impact increased gradually
during second and third week. At 5% significance level I
failed to accept null hypothesis, this indicates that
demonetization had statistically significant impact on
financial services index of NSE over the period of one
month.
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Impact on FMCG Sector At 5% significance level impact of demonetization on Metal

index is statistically significant.
Acute scarcity of cash among the individuals was expected
slowdown the demand of FMCG products in short run. Impact on Pharmaceutical Sector
Responding to this FMCG index of NSE fell by 9.55 over the
As the need for pharmaceutical products like medicines etc.
period of one month from the date of demonetization
is inevitable and as medical stores and government hospitals
decision. The volatility of FMCG index has increased by
were allowed to accept old currency notes, demonetization
73.41% after the demonetization. The level of impact
did not have much higher impact on pharmaceutical sector.
diluted over the period of second and third week. The impact
Within 30 days from demonetization decision pharma index
of demonetization on FMCG sector is statistically
of NSE fell slightly by 2.85%. The average closing price for
significant at 5% significance level.
30 days after demonetization is 5.47% lower than the
Impact on Infrastructure sector average price for 30 days before demonetization. Index
closed positive in first second and third week. The volatility
Among other sectors, Infrastructure is one of the least
of index fell by 17.19%. At 5% significance level
affected sectors of Indian economy. As majority of
demonetization has significant impact on pharma index of
transactions in infrastructure sector are not driven by cash
NSE.
demonetization has milder impact on infrastructure sector.
Index fell by mere 2.68% after on month of demonetization. Impact on private sector Banks
The average closing price for 30 days after demonetization
Private sector banks were highly affected by demonetization
is lower than the average closing price before
decision. Private sector bank’s index of NSE fell by 9%
demonetization by 3.75%. Increase in volatility of
within 30 days of demonetization. Average closing price for
Infrastructure index is 5.27%, that is very low as compared
30 days after demonetization was lower than the average
to volatility increase in other indices. At 5% significance
closing price for 30 days after demonetization by 5.45%.
level the impact of demonetization on infrastructure index of
The volatility of index has increased by 103.41%. At 5%
NSE is statistically significant.
significance level demonetization had significant impact on
Impact on IT sector private sector bank’s index.
IT sector is also one of the least affected sectors of Indian Impact on public sector banks
economy. As the mode of payment for most of the
Apart from IT companies demonetization also has positive
transactions in IT sector is other than cash, demonetization
impact on public sector banks. Average closing price of
had milder impact on IT sector. The slighter impact of
NSE’s Public Sector bank index for 30 days after
demonetization was very quickly absorbed by the IT index
demonetization is 1.49% higher than the average closing
and it successfully closed positive by 2.20% after one month
price for 30 days after demonetization. Index closed positive
of demonetization. IT index is the only index out of selected
during each of the four weeks after demonetization. The
indices that closed positive after 30 days of demonetization.
volatility of index has increased by 43.72% after
This shows that demonetization has lowest impact on IT
demonetization. At 5% significance level demonetization
sector. However the volatility of IT index has increased by
has significant impact on PUS bank’s index.
58.64%. The impact of demonetization on IT index is
statistically significant at 5% significance level. Impact on real estate sector
Impact on Media The worst impact of demonetization is on real estate sector.
In real estate sector as majority of transactions are driven by
After real estate the largest negative impact of
cash and funded by black (unaccounted) money,
demonetization is on media sector. NSEs media index fell by
demonetization has put most of the activities in real estate
10.79% after one month of demonetization. The average
sector on hold. Cash crunch among the individuals has
closing price for 30 days after demonetization is lower than
brought in heavy pressure on demand of homes in real estate
the average closing price before demonetization by 11.78%.
sector. Further liquidity shortfall on the part of real estate
Surprisingly the volatility of media index has declined by
developers has affected the supply side also. Investors in real
3.98%. At 5% significance level demonetization has
estate market are expected to adopt the policy of wait and
significant impact on media index of NSE.
watch in expectation of decrease in prices. Average closing
Impact on Metal Index price of real estate index for 30 days after demonetization is
19.99% lower than average closing average closing price for
Metal index is also one of the least affected index among the
30 days after demonetization. The volatility of Index has
selected indices. After falling in first week, metal index
increased by 2.97% during the post demonetization period.
recovered during the second and third week. 30 days after
At 5% significance level the impact of demonetization on
the demonetization metal index fell slightly by 1.15%. The
real estate Index of NSE is statistically significant. In the
volatility of metal index has increased slightly by 13.56%.

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long run however this measure along with Real Estate
Regulation and Development Act 2016 (RERA) will align
the real estate sector to the international standards of doing
business resulting in more fund flow from institutional
investors, banks and higher unit sales.
Impact on Service Sector
Service sector index of NSE fell by 5.23% after 30 days from
the date of announcement of demonetization decision.
Average closing price for 30 days after demonetization is
5.18% lower than the average closing price for 30 days
before demonetization. The volatility of Index has increased
by 16.43%. The absolute decline in index within 30 days of
demonetization is 5.23%. At 5% significance level the
impact of demonetization on service sector Index of NSE is
statistically significant.
Conclusion
Demonetization is one of the most remarkable decisions of
Indian government aimed at eradication of black and
counterfeit money and control of terror funding. This
decision will bring significant change in mode of payment
used by Indians and will transit India towards the cashless
economy. Undoubtedly the exact impact of demonetization
on Indian economy can be figured out only in long run but in
short run demonetization has considerable impact on
people, businessmen, small and medium scale industries,
companies and economy. The result of this study indicated
that demonetization has statistically significant impact on
all the indices under study. Considering the absolute
percentage change in closing price of indices within 30 days
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Pacific Business Review International
of demonetization decision, demonetization has negative
impact on all the indices except IT index. Except media
index and pharma index the volatility of all other indices
under study has increased considerably due to
demonetization. Average closing price of NIFTY for 30 days
after the demonetization is 5.78% lower than the average
closing prices for 30 days before the demonetization. The
absolute fall in NIFTY after one month of demonetization is
5.64%. Among the sectoral indices the highest impact is on
real estate sector followed by media and automobile sector
whereas the lowest impact is on metal index followed by
PSU banks and IT sector.
References
Sunita (2014), Demonetization of Indian rupee against us $:
A historical perspective, Discovery, 2014, 23(78),
108-112
Chatterjee and Banerji (2016), The Impact of
Demonetization in India, Squire Patton Boggs
Rao Kavita and Mukherjee Sacchidananda, (2016),
Demonetisation: Impact on the Economy, NIPFP
Working paper series, No. 182, 14-Nov-2016, New
Delhi.
Sabnavis, Sawarkar and Mishra (2016), Economic
consequences of demonetization of 500 and 1000
Rupee Notes, Economics: Policy View CARE
Ratings, November 09, 2016.
Litwack M. John (2000), Economics Directorate OECD,
75775 Paris Cedex 16, France, March 2000
101