Here's what foreign brokerages have to say on Rexit

While expressing caution on rupee volatility, the brokerages also see short-term negative impact on the markets

Most brokerage were ‘surprised’ at RBI Governor Raghuram Rajan’s decision to not opt for a second term after his current tenure ends in September. Most believe Rajan’s exit (Rexit) has implications for the domestic financial markets. Below are excerpts of what foreign brokerages said on Rexit:

CLSA

"Undoubtedly, Rajan has played a big role in building India’s credibility among the international investment community and his exit would disappoint many investors. However, we do not believe this is an end of the ‘India story’. The immediate near-term impact is negative for rupee and equity markets, especially in the context of the upcoming Brexit worries and large US dollar outflow worries as NRI deposits mature."

 

Citi

"We expect the markets to wait for more clarity on the new Governor’s name and more importantly his views on continuity versus change. If the new governor is able to strike a right balance between the two then he will gain credibility and market focus is likely to shift back to improved macro fundamentals."

Bank of Amercia Merrill Lynch

"Markets typically move on if the successor proves himself, as is mostly the case. We continue to expect a final 25 basis points cut on August 9 assuming the Met's forecast of 106 per cent of normal monsoon. We expect the RBI intervention to smooth any rupee volatility. In case of Brexit later this week, it would likely allow any US Dollar strength to play out."

Credit Suisse

"The governor’s unexpected departure is negative for the currency as it raises uncertainty over the new monetary policy framework, managing potential volatility around events like FCNR redemption in Sep-Nov 2016."

Nomura

"This is a negative surprise as markets (and we) were expecting him to continue. Dr. Rajan added credibility to the RBI and there is no obvious successor of a similar stature. There is also a risk of some delay in unfinished reforms such as formation of a monetary policy committee, bank restructuring and allowing repo transactions in the corporate bond markets. Although the news is negative in the near term, we do not expect a lasting medium-term impact."