Risk of near term FII outflows in debt on Rajan exit: Nomura

Moneycontrol BureauBrokerage house Nomura sees some risk of debt outflows in the near term because of the unexpected departure of RBI Governor Raghuram Rajan.“Given Dr. Rajan’s high credibility in bringing down inflation, his exit places a question mark over the RBI achieving its medium-term inflation targets,” says the Nomura note to clients.Also, Nomura feels Rajan’s impending exit leaves room for doubt over whether or not the government will adhere to medium-term fiscal discipline.The brokerage expects domestic investors to take a backseat as well, at least until more clarity emerges from a continuity perspective. “We believe that having a new governor will also raise the market’s perception that the RBI may deliver more rate cuts. This can be seen as positive for rates markets, but we expect the above-stated uncertainties to outweigh rate cut expectations in the near term,” says the Nomura note.