Hindustan Times (Delhi)

Patel’s appointmen­t to inject optimism into forex, bond mkts

- HT Correspond­ent letters@hindustant­imes.com

STABILITY FACTOR Choice signals harmony between RBI and govt, offers comforting degree of continuity to Rajan’s policies: Experts

MUMBAI: Foreign exchange, bond and stock markets are likely to finally heave a sigh of relief.

The appointmen­t of Urjit Patel as the next Reserve Bank of India (RBI) governor has injected optimism, and also brought to an end what industrial­ist Harsh Goenka aptly described as the most speculated event in the financial history of India.

“The appointmen­t is that of a known person,” said Hemendra Kothari, a veteran investment banker. “The world is going through a difficult period and it is good to have a man of such experience. He has worked with current RBI governor, so the transition will be smooth. His leadership at RBI will be good in trying to find solutions to the problem of stressed assets.”

Nilesh Shah, managing director of Kotak Mahindra Asset Management, said the appointmen­t “reassures both debt and equity markets.”

“Market participan­ts will be keenly looking forward to the next credit policy to hear the governor’s viewpoint,” he added.

Ajay Bodke, CEO (PMS) at Prabhudas Lilladher, said: “Institutio­nal investors, both domestic and foreign, would welcome the appointmen­t. It signals a seamless continuity in the policies pursued by RBI to conduct it’s monetary policy in an independen­t manner.”

Bond traders would also be watching the space closely. The previous credit policy of Raghuram Rajan, which was his last as RBI governor, had led 10-year yields to fall by 5 basis points to 7.12%, a three-year low. A lower interest rate on bonds means it is cheaper to borrow money — this has been seen as tacit approval of Rajan’s regime.

Dhananjay Sinha, head of institutio­nal research at Emkay Global, said markets will look at the appointmen­t as a positive as it “mellows down somewhat concerns raised in several quarters on Rajan’s exit. This target, the current level of elevated inflation and a hawkish new governor will lay the backdrop of policy rate dispositio­n, he added.

The appointmen­t comes at a time when withdrawal­s of foreign currency deposits loom large, and stabilisin­g the rupee appears to be the first challenge.

During September to December, outflows of up to $24 billion could tighten dollar and rupee liquidity. “We believe that RBI has all the tools in its armoury to get through this period without much stress. And it is already using some of these tools,” said Pranjul Bhandari of chief India economist of HSBC Securities.

 ?? HT FILE ?? Urjit Patel was appointed deputy governer of RBI in January 2013, during D Subbarao’s tenure as the central bank chief
HT FILE Urjit Patel was appointed deputy governer of RBI in January 2013, during D Subbarao’s tenure as the central bank chief

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