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In Wild Swing, Sensex Down 1000 Points Again

NDTV Profit logo NDTV Profit 09-11-2016

The Sensex sank over 1,600 points as it opened on Wednesday morning, but it pared some losses and traded at 26,618, down nearly 1,000 points, at 11 am.

The Nifty opened at near 8,000 levels and then recovered to 8,223, still down 320 points. Indian stocks tracked global markets, which were spooked by the unexpectedly powerful performance in the US presidential election of Republican Donald Trump, who led Democrat Hillary Clinton in early results and won key swing states including Florida.

A Clinton win has been favoured by markets as it will mean a continuity in US policy.

COMPLETE COVERAGE: Rs 500, Rs 1000 notes scrapped

The US dollar sank and the Dow futures were down over 3 per cent indicating sharp losses for Wall Street when it opens later in the day. Asian stock markets too went into a free fall, with Japan's Nikkei crashing 2 per cent as the US election turned out to be a nail-biter, sending investors stampeding to safe-haven assets. 

The crash in Indian markets has also been attributed by analysts to short-term disruption in the financial system caused by the government's abrupt announcement on Tuesday evening that 500 and 1,000 rupee notes will be discontinued.

WATCH: What to do with notes of Rs 500 and Rs 1,000

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Nearly 40 per cent of India's economy is driven by small- and medium-sized enterprises that largely run on cash transactions. Economists said Prime Minister Narendra Modi's demonitisation move on Tuesday evening could impact these businesses, and in turn have a knock-on effect on economic growth.

PM Modi announced the withdrawal of Rs. 500 and Rs. 1,000 notes to crack down on black money and counterfeit currency.

Market analysts welcomed the move. "If you look at India's economy point of view it's a very good measure," said Saravana Kumar, Chief Investment Officer, LIC Mutual Fund, adding, "Inflation will moderate and it's going to control the fiscal deficit. Black money will come down drastically." 

But some analysts have said that there could be short-term disruption in the financial system.

"There would be disruption - Short term pain for long term gain," tweeted market analyst Ambareesh Baliga. Dipan Mehta, a member of BSE & NSE, said today's correction is an opportunity to buy stocks who have been sitting on the sidelines.

"Indian economy's long-term fundamentals would not be impacted by the outcome of the US elections or by the government's move to scrap big denomination notes," he added.

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