Tuesday promised to be an interesting day for the markets, given that the recent state election results were to be announced. However, with news of Reserve Bank of India (RBI) governor Urjit Patel’s resignation surfacing on Monday evening, all eyes were on the markets on Tuesday to see how investors view the development.

The day began on a subdued note, with both the Sensex and the Nifty dropping around 1% in early trade. However, as the day progressed, the Sensex made a comeback from its 500-point fall and the Nifty, which had slipped to 10,400 levels, reclaimed the 10,500 mark. At the close of day, the S&P BSE Sensex was at 35,150, up 190 points or 0.5%, while the Nifty50 was at 10,549, up 61 points or 0.6%. This, even as the nation witnessed the Congress put up an impressive performance in the Assembly polls—it was set to dethrone the BJP in the three crucial states of Rajasthan, Chhattisgarh, and Madhya Pradesh.

The rebound in the markets left even ace investor Shankar Sharma of First Global asking questions. “The market reaction to the Assembly results has been intriguing to say the least. I expected a massive down day. What’s the market telling us?” he tweeted.

In fact, several experts had expected Patel’s exit to have a more adverse impact on the markets. Anders Faergemann, a fund manager at PineBridge Investments in London, said, “Our immediate concern is that if the resignation was influenced by the government’s interference with the central bank’s independence, it would obviously have very damaging consequences for RBI’s credibility,” adding that policymakers would need to address this issue immediately to avoid a sharp market correction.

“Markets will remain volatile until a new central bank governor is appointed,” said Frances Hudson, a global strategist at Aberdeen Standard Investments in Edinburgh. Meanwhile, Hugo Erken, senior economist at Rabobank International said, “Unexpected resignation hurts the central bank’s credibility and is likely to provoke a ‘fierce response’ from markets.”

Jan Dehn, head of research at Ashmore Group in London, was also expecting a fall in the markets, but was armed with a silver lining. “Indian assets will likely overreact to the departure, and this will create buying opportunities,” he said. “This is only bad news if bad macroeconomic policies follow, which is not certain yet. There will be plenty of trading opportunities, both up and down, so this is not a market you want to be out of.”

Given the market’s response on Tuesday, it is now clear that the investors are eyeing other factors.

“What is relevant for the markets is data on oil and U.S. bond yields. On that front everything is okay,” said market expert Prakash Diwan. “In the last seven sessions a lot of ground has been lost, so the investors probably thought it is time to buy in, and that’s what happened,” he said, adding that the focus will quickly shift from Patel’s exit to his replacement and from poll results to policy continuation and implementation.

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