Urjit Patel's sudden exit from RBI sends shock waves to nervous markets

Unexpected resignation hurts the central bank's credibility and is likely to provoke a 'fierce response' from markets

This was already a volatile week for markets in India, with state elections set to offer a lens on next year’s national vote. Then came the central bank governor’s shock resignation.

Urjit Patel quit on Monday citing personal reasons, a decision that some investors took as a new fissure in the Reserve Bank of India’s relationship with Prime Minister Narendra Modi’s government.

Reaction was swift, with rupee non-deliverable forwards weakening. The biggest exchange-traded fund dedicated to Indian stocks, the iShares MSCI India ETF, slumped the most in two years. Futures on the Nifty 50 Index extended declines Tuesday, sliding as much as