Demonetisation has a lot of impact on the markets. Equity markets and debt markets. Let me think what will happen in the debt market…MY VIEWS…NOT A TIP…CONSULT AN INVESTMENT PROFESSIONAL BEFORE YOU ACT.

I AM NOT SOLICITING BUSINESS…AND FRANKLY DO NOT CARE WHETHER YOU BUY, SELL, GO SHORT, GO AND DO A LEVERAGED BUY, BET YOUR FATHER’S HOUSE ON LINE – BE CAREFUL.

I am expecting the following things to happen – some are already happening…

1. Banks will get too much cash and will not know what to do
2. Banks have no capacity to lend sensibly so will go and buy Gov bonds.
3. The AAA rated bonds yield close to the G sec so not attractive enough
4. With so much of securities buying, interest rates will go down – OMO will happen I presume.
5. The people at the bottom of the table will have no cash to spend…so the economy at the bottom will get impacted
6. People will postpone eating out and buying luxury items for the next 3 months..leaving more money in the bank
7. Some of the money may be used for repaying loans – which is a negative for the banks
8. low growth, low consumption – low inflation, great stimulus for rate cut – bonds will move up further.
9. Some profit booking in long term debt products makes sense.
10. If you have some debt do not be in a hurry to close it..it is likely to be at a lower rate soon?
11. Real estate prices could crash – and that will bring a lot of problems.
12. In a rising market all the shit is hidden…once property prices fall, banks corrupt and idiotic practices will surface
13. A falling RE market may damage the balance sheets of Hdfc, Icici, Lic Housing, and SBI…Hdfc bank could remain unscathed
14. A hit in the RE market and equity market may see a default in the bond markets too
15. A hit in the bond market could create a run on the debt mutual funds?

all my own stupid views and ideas. The good things may happen many times magnified and the bad things may not happen at all….but on the other hand…..well..lets look for one handed economists.