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Volatile Indian markets to react sharply after RBI Rajan quits

volatile indian markets react sharply rajan quits

 

Indian markets could react extremely sharply to RBI governor Raghuram Rajan officially announcing that he will not continue in his position after his tenure ends on September 4, 2016, although senior market experts were of the opinion that that it will not be in panic-mode.

 

"Markets have been extremely volatile last week so there will be a knee-jerk reaction on Monday, but I don't think there will be a panic reaction as the market has full faith in the government bringing in a  worthy successor," said Deven Choksi, MD, KR Choksi Securities.

 

"Also it is not the government that has targetted Rajan but another individual so one cannot really blame the government. I have deep regard for Rajan and in fact believe that he should have become the Finance Minister of India, but as far as the markets go I think his departure has already been factored in and people have already taken positions," he added.

 

"I dont expect panic or the banking Nifty crashing by 500 points, there are some who might take negative positions on Monday but there will be no panic, some might go short, but they will regret it as long term this is a good development as credit growth will improve now," said senior market expert SP Tulsian.

 

"Rajan has respected the high office of the RBI governor and acted very gracefully, also see that he has not addressed the government or even the prime minister in his letter, he has only addressed his employees.  I don't expect markets to be in panic-mode there will be some knee-jerk reactions here and there but nothing that constitutes major panic," said Arun Kejriwal, MD, KRIS capital.   

Earlier this week, markets had crashed by more than 200 points as IIP numbers had disappointed and global cues like the Brexit had impacted sentiment negatively. Also earlier when news had broken that Rajan might leave, both currency and bond markets had reacted negatively.

 

"The Indian currency and equities might be hit on Monday, although I dont expect carnage," said a another senior expert.

This comes right after, BJP MP Subramanian Swamy launched a fresh attack on Rajan, in a letter to PM Modi, Swamy has accused Rajan and other officials of the RBI of money laundering and has sought the formation of a Special Investigation Team (SIT) to investigate the charges.Swamy even said that a case should be registered under the prevention of corruption act, adding that those close to former finance minister P Chidamabaram had benefited from the decisions.

He further claimed that RBI had granted licenses to small financial banks allegedly for money laundering purposes. He added that those who were granted licenses are controlled by foreign entities. This is not the first time Swamy has attacked Rajan. Earlier too, he had written to PM Modi urging him to sack Rajan because he was 'deliberately' trying to "wreck the Indian economy", and was also "mentally not fully Indian". 

Swami had demanded a CBI-led probe into the fact that RBI has allegedly been flouting its own rules while granting 10 small finance bank licences.Seeking action against RBI officials, including governor Raghuram Rajan, the Rajya Sabha MP alleged that the 10 entities were granted ‘in-principle approval’ by the RBI despite their failure to meet the eligibility criteria set out in the central bank’s guidelines, including those regarding foreign holding. Swamy, who had earlier written to the Prime Minister seeking the dismissal of Rajan for failing to lower interest rates and boost the economy, said that the RBI has “failed to perform the duty diligently” in grant of these approvals and there seemed to be “on the face of it, a mala fide negligence.”

He also sought to link the grant of the licences to possible money laundering of funds belonging to politicians and bureaucrats “friendly” to a former finance minister who still “dominates” high posts in the ministry.Swamy has said that the 10 licences granted in the private sector to small finance banks do not fulfil the criterion laid down by RBI “which confirms the malice in the RBI decision.”

 

 

 

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