Indian bonds and stocks rebounded after early falls on Tuesday to end stronger while the rupee recovered from the day's low as state election results were not as poor for the ruling party as some expected. But anxiety after the surprise resignation of Reserve Bank of India (RBI) Governor Urjit Patel the previous day kept financial market sentiment subdued.
Markets initially plunged in reaction to Patel's resignation announcement, after markets closed on Monday, which shocked many investors. "Patel's resignation bodes poorly for macroeconomic and financial stability in India," Fitch Solutions Macro Research, a unit of Fitch Group, said in a note on Tuesday.
The broader NSE stock index tumbled as much as 1.47 percent, but ended the day 0.58 percent firmer while the BSE index closed 0.54 percent higher. The rupee closed at 71.8650 to the dollar versus its previous close of 71.35. It had earlier dropped 1.5 percent to a one-month low of 72.4625.
It touched a day high of 71.68, aided by some dollar-selling intervention by state-run banks on behalf of the RBI.
The benchmark 10-year bond yield closed down 6 basis points on the day at 7.53 percent after initially rising as high as 7.71 percent. "Today's reaction by the markets is surprising to some, but it's a classic 'buy the rumour, sell the news' reaction. The news is already in the market price," Sunil Sharma, chief investment officer at Sanctum Wealth Management, New Delhi.
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