The India’s market braces for a tough week after the Reserve Bank of India Governor Raghuram Rajan announced his exit when his term ends in September in addition to the outcome of the EU Referendum. It is expected to be a wild ride for the Indian rupee as the currency made it to the top list of attention together with the India’s central bank.
The Economic Times poll showed that stocks, bonds and rupees are expected to slump in the short term reflecting the investors’ reactions to the sudden announcement. Nirmal Jain, the chairman of IIFL Holdings, said that the market was disappointed because his second term would benefit the market and the choice of his successor would be watched closely.
The timing of the announcement ahead of the EU Referendum can hurt the market sentiment further according to Divya Devesh, the foreign-exchange strategist for Asia at Standard Chartered Plc. He forecast the negative reaction of INR and further volatility. Rajan was credited for cutting currency swings by more than half and rebuilding the foreign exchange reserves during his term.
Markets really not liking Rajan leaving; #Rexit roils the Rupee. USD/INR forwards:
1M +0.76% 67.93
12M +0.72% 71.56https://t.co/NoabpT0tJv— David Ingles (@DavidInglesTV) June 20, 2016
Yes there has to be credit given to Rajan he took on bad bank NPA's and forced the bank to recognize bad debts
— rightswing (@rightswingin) June 19, 2016
Few years ago before Rajan take over as Indian Central bank chief Rupee down hard. its effect on other emerging countries cannot be ignored.
— IHSG Journal (@aldotjahjadi8) June 19, 2016
Things are not easy for the stock market, either. The volatility index (VIX), a measure of traders’ expectations of near-term risks, is expected to surge above 20 levels according to Amit Gupta, head of derivatives at ICICI Direct. The measure of the Chicago Board Options Exchange (CBOE) Emerging Markets Volatility Index also increased by 35% in more than a week, which signals the investors’ anxiety.
Both the Reserve Bank of India and its governor became trending topics on Twitter in India as the crowd divided into two sides. One side is supporting Rajan and his achievements for India, while the other side is arguing that the governor was holding back India’s growth.
Had no idea that Raghuram Rajan quit. Sad: Indian central bank chief felt undermined in weeks before quitting. https://t.co/jqY9oobY9Q
— Sura Mbaya (@surambaya) June 19, 2016
Raghuram Rajan as RBI governor reminds me of Dr. Abdul Kalam as president & TN Sheshan as CEC, inspiring & impactful https://t.co/bMjJwQ6DRX
— Tony Mathew (@tonymtweets) June 20, 2016
Rajan was-is carried away by media. Greatest undoing is he believed he's a bond which media painted. Went abt making cntro statements. Sad.
— Jaggu (@jaggu916) June 19, 2016
Great decision by Modi to let go of Rajan have been saying it for more than a year his interest rate decisions has cut growth
— rightswing (@rightswingin) June 19, 2016
However there is no use in trying to change the announced decision. India will soon look to find the successor to Rajan. Arundhati Bhattacharya, the chairman of SBI, is the leading candidate according to the ET poll followed by Arvind Subramanian, the current chief economic adviser to the government of India. The other two candidates are Urjit Patel, the deputy governor of RBI, and Shaktikanta Das, the economic affairs secretary in the Finance Ministry. According to Finance Minister Arun Jaitley, a successor will be announced soon.
Time to look ahead. Issues to focus : Brexit, rains, FCNR outflows, banking system stress, US President. Crucial phase for Indian economy.
— Uday Kotak (@udaykotak) June 19, 2016
Looking for new RBI Governor. @TheHindu pic.twitter.com/7ldKZgpII1
— Keshav (@keshav61) June 20, 2016
Dr. Raghuram Rajan has announced his intention to go back to academics at the end of his current assignment.(1/2)
— Arun Jaitley (@arunjaitley) June 18, 2016
The Government appreciates the good work done by him and respects his decision. A decision on his successor would be announced shortly.(2/2)
— Arun Jaitley (@arunjaitley) June 18, 2016
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