What are the psychological impact on the common man due to the sudden announcement of PM’s initiative Against blackmoney in India?

Psychologically, money works on a convention of mutual deception. We agree to call something money, and that is good enough. But to have the thinness of this convention exposed in such a way is to cause great anxiety.
Cash is not merely a symbolic representation of value. Cash is the idea of value captured and owned. It is the product of labour that is an entity by itself and becomes much more than what it can buy. Sitting on a pile of cash gives pleasure both metaphorical and real. The current demonetization creates an lasting psychological fear in the mind of people that you can not rely on currency.

• To convert one’s worth into worthlessness, even if for a small period is to make everyone nervous.
• Fear of such move against gold and real estate in the future. [spams are are spreading adding to ignite fear]
• Hours of standing in que for days for ones own hard earned money have created unrest in a vast majority. Though patriotic feelings have to an extend helped in not leading it to chaos.
• As cash flow reduced local vendors lost business. The daily wage workers lost job and their employer don’t have cash to pay. The low income groups in general faced the wrath as they were not prepared. This creates trauma as their was no income source .
• Without money to buy the essential commodities including grocery became difficult. Hence some of them starved hoping it will bring good to the nation.
• Earning money needs to be signified concretely. Those whose life’s earnings are in the form of a few high value currency notes, do not decode demonetization in quite the same way as those used to money in its conceptual form. The idea that it is possible to de-legitimise their life’s labour is to shake the foundations on which one’s life is constructed.
• The talk of ‘cashless’ is easy, but it ignores that there is a cultural dimension to the physicality of cash. Digital wallets operate on a transfer of intention, where a promise to pay gets converted into an intention to buy. For this to work at scale, one needs to have become comfortable with the idea of surplus and develop the confidence that money will come without having to struggle or having to think about it all the time. One needs to develop trust in institutions, in a context where the evidence around is overwhelmingly to the contrary.
• In rural India cash is the norm and they were not yet prepared for the change. For a vast majority Business means cash money as they are absolutely not used to plastic money. The older generation was not ready to accept the plastic money and e-business. This hurt their self esteem as they felt themselves insignificant in the world.

The idea Ad sums up their feelings and how they felt. It also explains what should have been done.
https://youtu.be/zo1BlVwc-dQThe government could have educated the students in colleges and universities who in turn can teach their family members, friends etc about the financial system and bank procedures. Once the preparation was already done the psychological impact could have been minimized.
Common man was happily enjoying all these as they believed even if they did not get anything from this decision, the rich whom they always envied lost so much money overnight. But the media reports kept coming which contradict with the claims of government, made them rethink. The economic loss was the initial ones, which had little to no effect. The news of citizens dying, grievance from the poor made many empathetic which changed the initial response. Government is moving to a defensive stand witnessing the unexpected outcome; which further affect the morale of common man.
But the majority including me hope that after few months of chaos, things will get better. Even if it may be/may not be effective as expected in putting an end to black money, people in general hope this phase will end in a month or two. Some still believe that it will bring the bring future.
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• In short result so far - lack of trust in the system, fear, anxiety, hope of a bright black money free word.

It is said that history is repeated, when we evaluate ‘5 Other Countries That Have Attempted Demonetisation In The Past’ and learn about the psychological impact it created in those nations, it provides an optimistic picture that we are in better condition when compared.
Reference
Insights on the psychology of cash money - Demonetization vs Financial Inclusion
Possible Effects of New Currency Change in India