(Bloomberg) -- For those who thought the worst for Indian lenders was over, Reserve Bank of India Governor Urjit Patel's resignation comes as another blow.
Despite a drop on Monday -- after state election polls showed that Prime Minister Narendra Modi's party is set for tight electoral contests before next year's general election -- the NSE Nifty Bank Index had rebounded 6.9 percent from a low in October through Monday's close. That's more than the 4.6 percent advance in the NSE Nifty 50 Index in the same time frame.
What's more, options hedging against volatility on the gauge of lenders were near their cheapest ever relative to Nifty 50 contracts, data compiled by Bloomberg show.
But the industry, already hit by defaults at an infrastructure financier and concerns over bad loans, will now have to contend with an added dose of uncertainty.
“The concerns about central-bank independence and financial-system strength will remain with India for the foreseeable future,” said Morgan Harting, a senior fund manager at AllianceBernstein in New York. “The former will continue to weigh on interest rates and inflation expectations to some degree, and the latter will also have some bearing on the valuation for financials stocks –- especially the state-owned banks with larger portfolios of non-performing loans.”
To contact the reporters on this story: Cecile Vannucci in Hong Kong at cvannucci1@bloomberg.net;Livia Yap in Singapore at lyap14@bloomberg.net
To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Cormac Mullen
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