MUMBAI: The biggest risk to the Indian bond and currency market will be if Reserve Bank of India governor Raghuram Rajan is not given a second term, according to Christopher Wood , the widelytracked managing director and equity strategist at brokerage and investment group CLSA.Rajan, who has been praised by international investors for keeping the rupee stable, will complete his term in September.Even though the governor has upset corporate India and several financial market participants with his tight liquidity stance and monetary policy that tracked the consumer price (instead of wholesale) index, he has emerged as an inflation warrior.Over the past one month, traders and bankers have been speculating that Rajan may return to academics when his term ends in September.Wood, in a report released on Friday, indicated that some of the financial markets could be impacted if the government does not renew Rajan’s term. Wood is the first person in the global investor community to voice such a concern.The CLSA strategist expects RBI to cut the repo rate by further 50 basis points this year. Wood said there was a legitimate argument that the RBI has remained too tight on interest rates, particularly if real interest rates were measured against wholesale price index (WPI), rather than the new reference rate of consumer price index (CPI).According to him, the rupee should remain relatively stable and low beta in emerging market universe given that Governor Rajan is consciously targeting real interest rates in stark contrast to the negative rates being targeted by the G7 central bankers.In ‘Greed and Fear’ report, Wood said that India could underperform Asian and emerging markets in relative terms if international investors continue to bet on the weak dollar and go long on crude oil and other commodities as they have been doing since February.However, while retaining its long-standing structural overweight rating on India, he advised investors to select stocks with relatively low beta, as an upturn in investment cycle was unlikely in the near-term.Investing in India also remains the most effective way to diversify amid uncertainties in China. However, valuations are not cheap with the Sensex currently trading at 17-times its forward earnings ending March 2017, said the report.“We like the Indian fixed income story, which for now continues to remain more straight-forward than the Indian equity story. This is also why foreigners will snap up all the bonds they can buy when the government allows them to buy more on the market,” said the report. FII currently own $52 billion worth of Indian debt securities.