The central bank intervened to stabilise the rupee against the US dollar during trade on Monday, after the currency opened on shaky ground, losing 61 paise intra-day.

On Saturday, RBI Governor Raghuram Rajan announced he would step down in September and will not seek a second term. Fears of the currency crashing on Monday were held in check, with the RBI encouraging the sale of dollars to keep the rupee steady. The unit recovered to close at 67.31 against the dollar, just 23 paise lower than Friday.

The equity markets, however, rose on Monday, with the benchmark index Sensex gaining nearly a percentage point (241 points) to close at 26,866.92 while the Nifty rose by over 68 points to close at 8,238.50, led by auto, IT and metal stocks.

Asian cue

Indian markets took their cue from their Asian peers, which were all in the green on Monday morning.

Domestic institutions were net buyers of equity on Monday, picking up shares worth ₹724 crore, while foreign institutions sold net equity of ₹537.46 crore. Retail investors on the BSE sold net equity of ₹124.78 crore.

Broadly, the markets acknowledged that the economy was on the path to recovery, and the RBI Governor’s unexpected exit would, at worst, be a short-term shock.

The institutionalisation of policy implies support for it “beyond the Governor, also among government officials and … within the RBI,” ratings agency Fitch said in a note.

CLSA, in a note to its investors, said: “The immediate near-term impact is negative for rupee and equity markets, especially in the context of the upcoming Brexit worries and large US dollar outflow worries as NRI deposits mature. We continue to maintain our cautious view on the market owing to the mismatch between valuations and fundamentals.”

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