Urjit Patel resignation: Expect markets volatility for some time

Updated: December 11, 2018 10:22 AM

RBI Governor Urjit Patel's resignation sent the value of one-month non-deliverable forwards (NDF) rupee-dollar contract to levels of 72.71 on late Monday evening. India’s markets have been performing poorly in 2018, being hugely over-valued even as corporate earnings have been very ordinary.

Yields had been trending down with foreign investors picking up debt worth 9 in November and 5 million in the first five sessions of December. (File photo)

By Shashank Nayar & Chirag Madia

RBI Governor Urjit Patel’s Resignation: The resignation of Reserve Bank of India (RBI) governor Urjit Patel sent the value of one-month non-deliverable forwards (NDF) rupee-dollar contract to levels of 72.71 on late Monday evening, on a day when the currency slipped to a three-week low of 71.34 to the dollar.

With exit polls to elections in key states suggesting a tight contest between incumbents and challengers, the BSE Sensex crashed 713.53 points even as global cues remained weak. Interestingly provisional data showed foreign investors were buyers of stocks on Monday, for a small quantity of $16.3 million but on the back of a chunky $672 million on Friday.

Bonds too sold off on Monday with the yield on the benchmark rising 13 basis points to 7.59%, even though liquidity concerns have eased and inflation is expected to remain benign.

Yields had been trending down with foreign investors picking up debt worth $889 in November and $525 million in the first five sessions of December.

While both the stock and markets could settle down should a new RBI governor be appointed soon, the fact is India’s markets have been performing poorly in 2018, being hugely over-valued even as corporate earnings have been very ordinary. While there were close to 780 companies with a market cap of Rs 1,000 crore or more in January, today that number has fallen to 718. Of these, nearly 80% have lost value since January. Again, of a total 370 equity–oriented mutual fund schemes, nearly 70% have posted negative returns over the last one year. More than half have lost over 25%.

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