The rupee opened weaker at 67.65 per dollar; Sensex opened 128.80 points down

The Indian equity benchmark indices opened the day in the red, the first trading session after Reserve Bank of India (RBI) governor Raghuram Rajan announced his decision to leave the central bank when his tenure ends in September.

The benchmark 30-share Sensex traded down more than 100 points during most part of the pre-open session. It opened at 26,497.11, down 128.80 points when compared to Friday's close of 26,625.91. Interestingly, banking majors like ICICI Bank, State Bank of India (SBI), Axis Bank along with HDFC were among the top losers in the morning session.

By 10 a.m., the Sensex shifted marginally in the positive territory with a gain of nearly 70 points. It was trading at 26,693.63.

Further, the rupee opened weaker at 67.65 per dollar — which is close to one month low — as compared to previous closing of 67.07 as foreign funds pulled out.

However, it recovered about 20 paisa after the central bank seemed to have intervened in the foreign exchange market to curb volatility.

It was widely believed that the markets would see some amount of knee-jerk reaction after Mr. Rajan announced his decision on Saturday by way of a letter to RBI staffers. He was largely perceived as a pro-market and reform oriented central banker.

"This is a negative surprise as markets were expecting him to continue... Although the news is negative in the near term, we do not expect a lasting medium-term impact," said global financial major Nomura in a note released on Sunday.

Interestingly, the fall in the Indian markets came amidst a positive trend in most of Asia.

Leading Asian indices like Hang Seng (Hong Kong), Nikkei (Japan) and Kospi (South Korea) were all trading up in the range of 1 to 2 per cent each.

The global markets have been trading cautiously in the recent past on concerns related to the possible exit of Britain from the European Union (EU).

Industry reacts:

Kotak Institutional Equities says, "The decision of the incumbent RBI governor not to seek a second term will likely unsettle investors sanguine about India. Most foreign portfolio investors (FPIs) view India as a preferred and stable market in an uncertain world given the powerful appeal of its (1) macro-economic stability, (2) ongoing economic and social reforms and (3) long-term growth prospects. They will now have to grapple with India’s ‘Rexit’ and a possible ‘Brexit’ in the next few days."

Ajay Bodke, ​CEO & Chief Portfolio Manager - PMS​, Prabhudas Lilladher, says the exit of Mr. Rajan "would lead to an initial wobble in the currency, bond and equity markets." He assured that India will stay as one of the most favoured investment destinations for foreign investors.

"However India’s strong macro-economic fundamentals - highest GDP growth among large economies in the world amidst weakening global growth, near - halving of consumer inflation from its peak a few years back, moderate fiscal deficit and sharp curtailment in current account deficit would ensure that India remains one of the most favoured investment destinations for foreign investors. It is neither Rexit or Brexit but RainExit that should be worrying investors more as nearly 60% of Indians still depend on agriculture & allied activities and with two successive monsoon failures the need for a normal monsoon to kick-start rural demand cannot be under underestimated."