Indian markets slide after central bank chief quits; state vote outcome in focus
Indian markets plunged early on Tuesday (December 11) before recovering some ground as Reserve Bank of India Governor Urjit Patel’s unexpected resignation on Monday (December 10) shocked investors.
For further direction traders were cautiously awaiting results from crucial state elections due later on Tuesday.
“Today is going to be a roller-coaster ride,” said stock market expert Sunil Shah in Mumbai, the country’s financial capital.
Patel’s resignation came after a month-long tussle over policy with the government that has raised concerns about the central bank’s independence as a national election nears.
Government officials had been pressuring the RBI to allow some public sector banks laden with bad debt to lend more easily and pushed for the central bank to hand over some of its surplus reserves to help fund the fiscal deficit.
The Indian rupee dropped 1.5 percent to a one-month low of 72.4650 per dollar in early trade but pared some losses to trade at 72.24 by 0453 GMT versus its previous close of 71.35.
Traders also cited some dollar-selling intervention by state-run banks on behalf of the RBI, which helped stabilize the rupee.
The benchmark 10-year bond yield was at 7.65% versus 7.59% at the previous close after initially rising as high as 7.71%. The broader NSE stock index was down 1%.
India’s ruling BJP was trailing on Tuesday in three big heartland states, two TV networks said, as counting began from local elections seen as a final trial of strength for Prime Minister Narendra Modi before general elections next year.