Indian markets on Monday staged a smart pullback with the rupee rebounding 56 paise to 67.07 and the Sensex surging 333 points on apparent hopes pegged on Raghuram Rajan taking over as RBI governor.
The BSE benchmark Sensex opened higher and moved in a range of 18,188.43 to 18,612.60 before settling at 18,567.55, a rise of 332.89 points or 1.83%. Gains were led by metal, healthcare and auto stocks. Investors became richer by around Rs. 1 lakh crore as overall 1,347 stocks rose on BSE.
Markets were relieved that reports of missile firings on Tuesday turned out to be tests carried out jointly by Israel and the US. on Tuesday, Sensex fell 651 points to a week-long low.
On the currency side, suspected intervention by the central bank helped the rupee retreat from near record lows and end at 67.07 against the dollar, up 56 paise. The rupee had lost 193 paise in previous two sessions.
The strong show in the markets was a positive sign for Rajan, who took over at the helm of the RBI, which has been combating a currency slump, high inflation, low growth and a widening current account deficit.
Market participants are hopeful the new governor will draw upon his global experience to bring the economy back to a higher growth path and mount a more effective defence of the battered rupee.
"The street remains optimistic of him being able to reverse the general downtrend in economic growth," said Sanjeev Zarbade, a vice president at Kotak Securities.
Hopes of a change in monetary policy stance also emerged.
IIFL research head Amar Ambani said: "With a new RBI governor, one does hope for a rate cut or at least one expects no further hikes. But it would be unfair to expect miracles."
The RBI on Wednesday eased external commercial borrowing norms to allow companies to use overseas loans for general corporate purposes. It also clarified that the August 14 curbs were not intended to restrict bona fide overseas investments.
Meanwhile, barring New Delhi, gold prices mostly dropped in major metros. The precious metal fell Rs. 710 in Kolkata, Rs. 570 in Mumbai and Rs. 465 in Chennai. In the national capital, gold gained Rs. 660 to end at Rs. 32,200.