Stocks and rupee on Monday opened with an early morning plunge but equities bounced back to score a 241-point rally as Rexit jitters got blunted by a new wave of FDI reforms, hectic buying by institutions, talking-up by influential market men and easing Brexit worries.
Rupee, however, could not be saved of its morning blues entirely and ended 23 paise down at Rs 67.31 against the US dollar, although intervention by RBI in the forex markets helped its partly recoup the losses. The Indian currency had plunged almost one percent or 61 paise to a low of Rs 67.69.
RBI bought government’s securities worth Rs 10,000 crore through OMO purchase auction held on Monday, while the total amount offered by participants stood at Rs 45,922 crore.
There have been concerns about a sharp plunge in stock and rupee valuations after Rajan made a surprise announcement over weekend that he would not take a second term at RBI.
Stock market benchmark Sensex plunged to as low as 26,438 points in pre-open trade between 0900-0915 hours, down nearly 200 points from its previous close, but early morning buying orders helped limit the opening loss at 178 points.
After touching a low of 26,447.88 in opening trade, the Sensex recovered sharply to scale an intra-day high of 26,885.49 points before finishing at 26,866.92, showing a gain of 241.01 points or 0.91 per cent.
Nifty closed 68.30 points or 0.84% up at 8,238.50.
Marketmen said some big domestic institutions could have been pressed into buying to check the losses, as turnover was relatively higher in early morning trades for a Monday.
Seeking to allay concerns, government sources said a successor would be announced well in advance, preferably by July-end, to replace Rajan after he demits office on September 4 to help smoothen the transition.
Several prominent marketmen, including ace investor Rakesh Jhunjhunwala, said in their commentaries before and during the trading hours that Rajan’s exit should not be a major worry for the markets as right policies are in place.
However, a big soothing voice came from Fitch which sought to allay concerns of any impact on India’s sovereign ratings due to Rajan’s exit, saying “policies are more important than personalities” on this front.
Moreover, in sweeping reforms, the government on Monday decided to ease FDI norms in civil aviation, single-brand retail, defence and pharma by permitting more investments under automatic route -- a decision which some people said could have been advanced to counter Rexit jitters in markets.
Economists at Citigroup said markets would wait for more clarity on the new RBI Governor, while several analysts said that multiple positive factors helped allay the worries.
In overseas trade, oil prices extended gains in Asia on the back of a weaker US dollar and easing fears of UK’s exit from the European Union.
Back home, aviation stocks were in the limelight after the Centre’s decision to allow 100% FDI in civil aviation. Stocks of Spicejet, Jet Airways and InterGlobe surged by up to 7.36%.
Shares of companies involved in manufacturing of defence equipments such as Reliance Defence, BEL and Bharat Forge also witnessed strong rally, rising by up to 7.39 per cent.