This is what we have to say about Mr. Raghuram Rajan’s decision to leave Reserve Bank Of India ( RBI ) after the end of his current term in September.
This is what happens when you state the obvious to politicians. He is the only central bank chief with chutzpah to tell governing politicians that central bank can’t cure it all with just cutting rates ! At some point they need to pick up the baton to reform and enact policies to progress. So he didn’t has much choice. Either keep on cutting rates or do whatever pleases to the boss or show them the finger and leave. Besides his rising international acceptance and appeal wasn’t going smoothly with someone who likes to grab all the attention whenever India is mentioned in international media. Guess who? 😉
We are not sure how markets will open on Monday because conventional wisdom says it will go down, but we have our doubts. Because in short term market may think that now he is going to be replaced with someone who will definitely start cutting rates and let the banks roam freely and that may cause markets to rally.
And of course USDINR is going to breach 70 mark in no time !
We have been bearish rupee for long time and there are obvious reasons for that. Here is what we said last year about rupee. In a nutshell, nothing happens with empty promises of reform and someone who knows the country well, should be aware of the fact that it is not going to change in our lifetime at least !