Shares may not fall much, but rupee, bond seen shaky

Moneycontrol BureauRBI Governor Raghuram Rajan’s premature exit will send out a poor signal to foreign investors, but the impact on share prices on Monday could be limited, market experts told CNBC-TV18. On the other hand, the currency and bond markets could see some volatility, they said.Also, pressure on stock prices if any would be more due to uncertainty in global markets over UK staying in the Eurozone, experts said.“Least vulnerable is the equity market because of the ambiguous impact of this event (Rajan’s impending departure),” Ambit Capital’s Saurabh Mukherjea told CNBC-TV18.The Sensex on Friday closed at 26625.91, up 100 points over its previous close, and the Nifty closed at 8170.20, up 29.45 points.Better than expected quarterly corporate earnings, signs of a turnaround in the economy and the positive mood in global markets had lifted equity benchmarks to seven-month highs earlier this month.But a dismal industrial output reading for April, steadily rising inflation, uncertainty over Brexit and now Rajan’s exit could ideally embolden the bears.Still, market experts who spoke to CNBC-TV18 feel the undertone is still positive.“You could argue that Rajan’s exit could potentially lead to a Governor who follows an easy money policy; who goes easy on the banking system and thus allows New Delhi to reflate the economy through a mixture of easy monetary policies and taking it easy on the NPA issue,” he said.A source of worry for the currency market is the upcoming redemption of around USD 25 billion worth of NRI deposits which were raised during the rupee crisis of August 2013. And while the RBI has said that it is geared to meet the redemption, market players expect some volatility in the rupee which could then also spill over to the bond markets. Foreign institutional investors have net sold USD 1.1 billion of Indian debt over the last month since senior BJP leader Subramanian Swamy began his tirade against Rajan.And while some market players expect a knee-jerk reaction in the equity market, they feel any disappointment will be quickly gotten over.“I think monsoon ultimately has a larger daily impact on Indian lives than we would have in the short run whether it is Brexit or Raghuram Rajan,” BSE broker Ramesh Damani told CNBC-TV18.“Raghuram Rajan is the long term impact of us to maintain independent judiciary, independent institutions in this country and that has taken a blow. In the short run my personal feeling is that once the dust clears about that Janet Yellen was unlikely to raise interest rates, Brexit won’t happen and Raghuram Rajan, the market will resume it upward climb,” he said.Nirmal Jain of IIFL shares a similar view.“There can be an initial reaction, but supposing if I were an investor I won’t really become bearish on the country because of this (Rajan quitting),” Jain told CNBC-TV18.“Market will look for cues on who is coming in next and whether there is a person of similar calibre or who can make sure that institution is autonomous and the reform process and the restructuring process for banks that continues,” Jain said.