Urjit Patel to be new RBI governor; Sensex, Nifty may cheer his appointment

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Updated: August 20, 2016 8:21:24 PM

Domestic equity markets may cheer the appointment of Urjit Patel as the next governor of the Reserve Bank of India (RBI).

For the week ended August 19, 2016, the BSE Sensex dropped by 75.40 points, or 0.27 per cent, to 28,077. The 30-share index was at 28,152.40 on August 12. (PTI)For the week ended August 19, 2016, the BSE Sensex dropped by 75.40 points, or 0.27 per cent, to 28,077. The 30-share index was at 28,152.40 on August 12. (PTI)

Domestic equity markets may cheer the appointment of Urjit Patel as the next governor of the Reserve Bank of India (RBI). At present, he is working as the deputy governor of the central bank. Last week, benchmark indices BSE Sensex and NSE Nifty remained cautious over the speculation on the successor of current governor Raghuram Rajan, whose term will end on September 4.

For the week ended August 19, 2016, the BSE Sensex dropped by 75.40 points, or 0.27 per cent, to 28,077. The 30-share index was at 28,152.40 on August 12. Likewise, the 50-share Nifty index lost 5.25 points, or 0.06 per cent to 8,672.15.

Also Read: Urjit Patel named new RBI governor; to take over from Raghuram Rajan

Ajay Bodke, chief executive officer and chief portfolio manager – PMS, Prabhudas Lilladher said, “Institutional investors both domestic and foreign would welcome government’s appointment of RBI deputy governor Urjit Patel as successor to Raghuram Rajan. It signals a seamless continuity in the policies pursued by the RBI to conduct its monetary policy in an independent manner. One of the most seminal achievements of Rajan was the signing of monetary policy agreement between the government and RBI for “flexible inflation targeting” that was based on the report of the panel headed by Urjit Patel. Patel’s path-breaking report has helped India join the league of developed nations where adoption of flexible inflation targeting has helped anchor inflationary expectations and brought about a structural control over inflation. Markets would strongly cheer the appointment.”

Also Read: Urjit Patel’s appointment as RBI governor gets ‘blessing’ from Subramanian Swamy?

In 2013, when Raghuram Rajan took over as the governor of RBI, stock market reacted positively with the BSE Sensex surging 1,430 points, or 7.70 per cent, in four trading sessions. The index soared from 18,567.55 on September 3, 2013 to 19,997.45 on September 11, 2013.

G Chokkalingam, founder, Equinomics Research & Advisory believes the market may touch record high by December end after the appointment of new governor. He said, “The appointment of new RBI governor will be pro growth rather than pro inflation control. Monetary policy would be conducive for growth and hence market may hit their record high by December 31.

According to the latest data released by the government, wholesale price index (WPI) inflation in July jumped to a near two-year high at 3.55 per cent as against 1.62 per cent on month-on-month basis due to higher food inflation. Retail inflation also soared to nearly two-year high of 6.07 per cent in July.

Jimeet Modi, chief executive officer, SAMCO securities said, “The newly appointed governor would be good for the markets as there won’t be any drastic disruption in the policies as he being the existing deputy governor is abreast of the economic matters in the country. We see continuation of the policies as the positive trigger for the market. The legacy of Rajan in a way will continue.”

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