Had Rajan stayed on, bond markets may have benefitted: Nomura

The is no obvious successor to RBI Governor Raghuram Rajan of a similar stature, Vivek Rajpal, Executive Director, Nomura India. The market was expecting him to continue, says Rajpal, and that if he would have decided to take up a second term he would have been serious about medium-term inflation targets. This would have been very beneficial for the bond markets.He hopes to see the policies introduced under Rajan to be continued under the new head. Talking about the markets, Rajpal says they have factored in the reduced possibilities of a Brexit.Below is the verbatim transcript of Vivek Rajpal’s interview with CNBC-TV18's Reema Tendulkar and Mangalam Maloo.Reema: Are you surprised that we have not seen too much of a reaction in the Indian bonds as well as in the currency market, take us through today's reaction and how do you foresee the coming weeks?A: Today's reaction should be looked in the context of global calm as well. It appears that global markets have reduced the probability of Brexit which has acted as a calming thing over the news that we got over the weekend. Having said that there is a lot of uncertainty that remains as far as India debt and FX markets are concerned. And it is not surprising that at a time when most of the other markets are doing fine we are actually underperforming.Mangalam: So, there are a lot of worries as to who the successor is likely to be and there are lot of names doing the rounds as well. So, from a bond market perspective and for the policies to continue what are the names that you guys are working with and what name are you hopeful that the street will take in a positive light?A: Very difficult to first of all see many names which can have as high credibility as Dr Rajan has. More than names it will be interesting to see under the new leadership how much priority one gets on for example inflation targeting framework, how much pressure RBI keeps on government as far as adhering to fiscal discipline is concerned. Those are the things that I would be rather watching. Of course inflation targeting framework is already in place but the interpretation of inflation targeting framework and how seriously one takes the medium term four percent inflation target is something that needs to be watched. I would have thought Dr Rajan who had been quite serious about medium term inflation targets which would have acted very beneficial to bond markets from a medium term perspective and therefore rather than looking at the names it is important to see whether we get the policy continuity or not as the new governor comes in.Reema: Rajan added a lot of credibility to investors in terms of policy making. Do you see FII flows in terms of debt markets getting affected on account of this?A: Yes, there is, definitely as far as credibility is concerned, the kind of credibility that Dr Rajan brings and that is somewhere associated with his credibility on taking the inflation down to four percent with him being a big proponent of fiscal discipline. Those are the things that ultimately matters as far as strategic view on India is concerned. Therefore to some extent given the current uncertainty debt flows will get affected.