The double whammy of demonetization and the election of Donald Trump as US president has unnerved the Indian equity market and the Nifty is down 3.8% from its 9 November close.
How much of that is due to the Trump effect and how much on account of the deflationary impact of demonetization?
The accompanying chart provides some clues.
The biggest fall has been in the Nifty Realty index, which, for obvious reasons, bears the brunt of demonetization.
The next biggest fall has been in the Nifty FMCG index, which too, analysts say, will be affected temporarily due to the disruption in cash payments.
Partly, the sector’s high valuations may have led to some selling.
The IT index, directly related to the Trump effect, hasn’t really fallen by much.
On the other hand, the metal index has more or less held its ground, thanks to the perception that Trump’s spending on infrastructure will raise prices of industrial metals.
The pharma index has been a good defensive bet, partly in the hope that Trump will be more liberal about pricing.
In short, so far the demonetization impact seems to be weighing on Indian equity markets more than the Trump effect.