Report by- Sabyasachi Bhattacharya
RBI governor, Urjit Patel, resigns; read below to check what happened and how it’ll affect the markets –
Urjit Patel has resigned as the Reserve Bank of India (RBI) governor, nine months before his tenure was to end in September 2019, ending a 27-month long stint at Mint Street rocked by a testy debate on the central bank’s autonomy. The timing of Patel’s resignation is crucial. It comes four days ahead of the RBI’s scheduled board meeting on December 14, slated to discuss several contentious issues. Patel has cited “personal reasons”, but it is anybody’s guess why he chose to pull the plug. “On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honor to serve in the RBI in various capacities over the years,” Patel said in a statement. Since August, the RBI’s relationship with the government has been anything but cordial. The government did not state the reasons for Patel’s resignation. “The government acknowledges with a deep sense of appreciation the services rendered by Dr Urjit Patel to this country, both in his capacity as a governor and the deputy governor of the RBI. It was pleasure for me deal with him and benefit from this scholarship,” Finance Minister Arun Jaitley tweeted. Patel’s deputy Viral Acharya first flagged the government’s reported attempt to tread onto the central bank’s territory. The RBI Act, the key legislation that defines the central banks functioning, role and reporting relationship with government, has become part of mainstream public discourse, with a strong body of opinion on both sides of the fence.
Let’s take a look at how this impacts our economy and the financial markets-
- Global headwinds like escalating trade war between US & China, Britain’s Parliamentary vote on Brexit and fears of a slowdown in the global economic growth in 2019 has already led to a sharp spike in risk aversion for risk assets like equities.
- The topic of Viral Acharya’s incendiary speech that created tremors in the financial markets was in fact suggested by Patel.
- None of the issues that caused a rift between the government and the RBI like lending a helping hand to credit-starved MSME sector in the wake of drying-up of liquidity post ILFS bankruptcy, alignment of PCA norms for PSBs with global practices, transfer of surplus reserves to the government .
- No individual is greater than an institution and India’s macroeconomic fundamentals remain extremely robust with its GDP growth being among the highest in the world, inflationary expectations remaining well-anchored, inflation outlook being benign, plunge in global crude prices allaying concerns on the current account front and government remaining resolutely committed to the medium-term fiscal consolidation plan.
- The government needs to urgently appoint an eminent economist preferably one who has decades of administrative experience by virtue of shouldering various senior roles in the government and can adroitly manage the differences with the government and at the same time defend the institution’s autonomy.
Source- MoneyControl, Purple Trades Research Department
Bloodbath on Dalal Street as major Indices plunge majorly –
Chart source- ChartInk
Indian markets started the week on a very negative note as major Indices, Nifty and Sensex, bleed on Dalal Street and ended up on a major downfall. As you can see in the chart given above, Nifty had huge GAP-DOWN opening which made sure that the Index opened up losing almost 200 points. There wasn’t much of an activity after the huge gap-down but due to the last hour selling seen in major sectors the Index was further pushed and closed below 10,500. Gains of the last week or so were wiped off completely after this setback today. RBI governor also resigned today which is not at all good for the markets right now. Further heavy selling is being expected in the markets for the coming few days. The Index gave up the levels of 10,700 much easily than it took to gain those levels. Bears took complete control on D-Street, as benchmark indices shed nearly 2 percent. Weak global cues, reactions to exit polls as well as weak macro data weighed big on Sensex and the Nifty. The 50-share index ended the session below 10,500. Selling was visible across all sectors, with maximum pain seen among banks, automobiles, energy, consumption and pharmaceuticals, among others. At the close of market hours, the Sensex was down 713.53 points or 2.00% at 34959.72, and the Nifty down 205.20 points or 1.92% at 10488.50. The market breadth was negative as 647 shares advanced, against a decline of 1870 shares, while 134 shares were unchanged. Coal India, Maruti Suzuki, IOC and BPCL were the top gainers, while Kotak Mahindra Bank, Reliance Industries, and Indiabulls Housing lost the most.
Let’s take a look at the heat map-
Let’s take a look at the performance of major Indices-
Global markets plunge as well. Indian markets as we saw earlier took a nosedive but we weren’t alone. US markets Index NASDAQ, European Indices FTSE, DAX, CAC and Asian Indices like Nikkei and Straits Times took a beating too.
Source- MoneyControl, Purple Trades Research Department
Key Points for Traders to watch out for while trading Nifty tomorrow-
- 10,450 is a short term support for Nifty.
- If Nifty breaks 10,450 then it has the potential to go down.
- 10,520 is a short term resistance for Nifty.
- If Nifty breaks 10,520 then it has the potential to go up.
Top sectors that moved the market today- Data source- Moneycontrol
Top Gainers for today- Data source- Moneycontrol
Top losers for today- Data source- Moneycontrol