The development of Reserve Bank of India Governor Urjit Patel resigning on account of personal reasons is a big negative cue for the market, experts told Moneycontrol.
It will also impact foreign investors’ perception of the Indian market. Volatility due to state election results on December 11, further complicates the situation for an investor. Results to elections in five states of Rajasthan, Madhya Pradesh, Chhattisgarh, Mizoram and Telangana are key to understanding politics scenario. The market usually favours a stable mandate.
“The quitting of RBI governor comes as a negative cue for the market. As such, exit polls were not looking favourable and this news complicates things further for the markets. There could be more correction lined up ahead. We expect Nifty to touch 9,900 levels soon,” AK Prabhakar, Head of Research at IDBI Capital told Moneycontrol.
The resignation comes in the backdrop of an open war of words between the central bank and the government over several issues. Street was abuzz with rumours before it's recently concluded Board Meeting that the Governor would step down. Eventually, it appeared as if a truce was declared between the entities. Hence, experts add, this is a shocking move for the market.
"RBI governor stepping down is a big negative cue for the market. As such we have results to state elections lined up and this adds to the negativity. The government needs to move swiftly and search for a successor and investors will watch out for a successor in place too," Rusmik Oza, Head of Fundamental Research at Kotak Securities told Moneycontrol.
Meanwhile, experts at Anand Rathi Securities believe that a knee-jerk reaction is possible but investors will look forward to the election results too.
“Market will definitely have knee-jerk reaction in opening tick amid likely uncertainty over next RBI governor, how the equation will be between government and RBI etc After opening reaction, the focus of the market will shift to elections' results,” Siddharth Sedani, Vice President - Equity Advisory, Anand Rathi Shares and Stock Brokers said.
He believes the 10,000 levels on Nifty should not be broken unless and until any worst outcome comes from elections.
As the Nifty Bank and banks stocks are likely to fall sharply, he advises buying HDFC Bank, and also Asian Paints, Hindustan Unilever and Aditya Birla Fashion.
Case file
Governor Patel on Monday resigned, citing personal reasons.
"On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years," the governor said in a statement.
The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank’s considerable accomplishments in recent years. I take this opportunity to express gratitude to my colleagues and Directors of the RBI Central Board, and wish them all the best for the future," he said.
The resignation comes in the wake of a bitter battle between the government and the Reserve Bank of issues such as liquidity management, the RBI's restrictions on NPA-laden banks and the usage of its reserves.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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