How Market could react after RBI Governor’s Resignation?

RBI Governor Urjit Patel resigns!

RBI Governor Resignation

Like any normal day, I was using my phone to search and find some stocks which could I give on my blog as an Stock ideas. I was using Moneycontrol app to look at something but suddenly, I saw an unexpected title in one of its news notification. It was “RBI Governor Urjit Patel resigns citing ‘personal reasons’ “. At first, I thought it is some mistake by Editor/Publisher. But when I opened my T.V and switched to a News Channel, I found it was Real! And when I was watching News Channel to understand what has really happened, one more Breaking News appeared there with a title “UK court orders extradition of Vijay Mallya to India”……

Election results are on the way and are expected to clear the picture of New Rulers of States by tomorrow Evening. Exit Polls of elections which came on Friday’s evening, have already dragged Nifty to around 10500 levels today. Now, market will have to face the selling pressure arising after Resignation of RBI Governor on 11th December, which was already occupied for the great volatility due to Election results. To have some clear picture about how market would react, I took a view on SGX Nifty and found it trading around 10300, down almost 200 points from today’s closing levels in India.

First of all, investors should take the UK Court order on Vijay Mallya as almost negligible thing for the tommorow’s market. However, it may have some affect on UB Group companies.

Secondly, taking the current scenario and situations into consideration, I think RBI Governor resignation has came to that time when its normal affect on market could rise by 1.5 times. Including me, most of the experts don’t know the real and exact reason behind why Urjit Patel decided to resign! Whether the Government had already chosen a new RBI Governor before Urjit Patel resignation, after conflict in views between Central Government and Central Bank, or Urjit Patel suddenly opted this option to avoid any more conflict with Government or he felt that Central Government is not allowing him full freedom or due to his personal reasons, more clarification on this is awaited.

Although, after the series of resignations that has taken place in 2018, i don’t think Government is getting full support from its party members itself which is a concern for Investors. I will try to explain in next post why Investors wants Modi Government to come in Power again. But in this post, I just want to tell that condition of Market may get more worst now.

What all these mean for Investors?

Step taken by RBI Governor today has enough potential to pull Nifty around 10250 tomorrow. I don’t want to say it but in case BJP loosed both Rajasthan and Madhya Pradesh tomorrow, the situation may really get very wrost. If BJP loosed completely tomorrow, then I don’t think BJP would be able to form Government on its own in Lok Sabha Elections also. And Definitely, loosing state elections will make the path of BJP much more difficult as compare to earlier.

I know State Elections generally gathers some different response and choices from voters as compare to Lok Sabha Elections. But at the same time, it is also true that it is a indication of how Party is actually getting support of the Voters.

Although, I think levels of around 10050 are once again possible in Nifty in case results of state elections comes in against of BJP. But if we able to see any Modi Magic once again tommorow, then situation will be little different. But in any case, Now I don’t think market has any possibility to cross levels of 11000 in December Series.

Although, Shorters are now on a beneficial side and should continue their short positions with a wide stoploss.

After state elections result whether BJP wins, loose or show some magic again, the most important thing which is going to be watched closely by different Institutional Investors will be how well Government would be able to handle this situation.

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