It’s a gap-down start to the market on Tuesday morning as investors turned wary of a shock resignation by RBI Governor Urjit Patel. Additionally, uncertainty around results to state elections in the five major states — Rajasthan, Chhattisgarh, Madhya Pradesh, Telangana and Mizoram — which is due Tuesday, added to their woes.
The Sensex is down 404 points at 34639.58, while the Nifty is lower by 78.30 points at 10410.65. The market breadth is negative as 90 shares advanced, against a decline of 418 shares, while 16 shares were unchanged. The Indian rupee began trading on a negative note, falling over 1.5 percent at 72.46 per US dollar.
Among sectors, banks, automobiles, energy, consumption, and metals are the top losers. The Nifty Midcap index is down over a percent as well. Infosys and Tech Mahindra are the top gainers, while IndusInd Banks, Adani Ports, and Reliance Industries lost the most.
In an interview to CNBC-TV18, Saurabh Mukherjea, Founder of Marcellus Investment Managers said he is worried about the institutional damage to the RBI. "In short term, RBI governor's resignation is negative for the market and hence, the rupee weakness is the likely near-term outcome." He believes FIIs haven’t been gung-ho about Indian markets in last few months.
"RBI Governor Urjit Patel has resigned, effective immediately, citing personal reasons but we believe it is very likely due to significant differences with the government. This is coming at a very inopportune time for the markets as we brace for elections results. Exit polls have indicated adverse results for incumbents. Fiscal/monetary policy outcomes now get intertwined with political outcomes and steps by the government in the next few days become very critical. In the case of an unfavourable election verdict and a successor name not inspiring confidence, India could see sharp de-rating. In that case, we would look to export sectors like IT, pharma and consumer as potential safe harbours," said Inderjeet Bhatia of Macquarie.
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