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Bulls Make A Comeback As Government Allays Fears On RBI Issue

Stock markets were apprehensive after the government and RBI spat became public following a speech by RBI’s Deputy Governor Viral Acharya where he mentioned that the RBI’s autonomy should be maintained at all costs and government

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Stocks staged a strong comeback after teetering on the brink in the early part of the trading day after the government announced that the autonomy of the RBI will be maintained. Stocks were slammed as the Nifty slipped nearly 90 points in early morning trades but a clarification from the government set the bulls on a rampage. From its lows, the Nifty surged nearly 270 points as trading ending, rising over 1.85 percent over the previous day. 

Over 75 percent of the Nifty index constituents ended the day in positive territory with Tech Mahindra, Indiabulls Housing, UPL, HDFC and HCL Technologies gaining over 5 percent in the market. Tech Mahindra and Indiabulls Housing surged 8 percent in the market that is expected to show positive momentum in the coming days. 

Stock markets were apprehensive after the government and RBI spat became public following a speech by RBI’s Deputy Governor Viral Acharya where he mentioned that the RBI’s autonomy should be maintained at all costs and government. "Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution," Acharya said.

The government today set to allay market fears and released a statement in the morning maintaining the RBI’s autonomy. The finance ministry statement stated that, “The autonomy for the Central Bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Governments in India have nurtured and respected this. Both the Government and the Central Bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy.”

Stock markets are now expected to continue the upward momentum. Some of the triggers that are expected to ease the pressure on the markets are falling crude prices. WTI Crude prices traded at $66.47 to the barrel slipping from over $70 levels. Experts opine that if crude prices fall further, the pressure on the markets could ease further. 

The rupee which was trading weaker in the early morning sessions, recovered and traded at Rs 73.98 to the dollar. The mid- and small-cap indices gained 1.92 and 1.42 percent respectively. 

Bulls are expected to remain in control of the markets in the next few days. In the longer run, a pause in US Fed rate hikes could send positive signals in emerging market stocks. 



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