UBS' Dennis Sees Rajan's Exit As Negative For Markets Audio)

gain there of one percent. Naz stack up sixty, a gain of one point three percent down industrials up one d ninety, a gain of one point one percent. The tenure down eighteen thirty seconds. That yield one point six six percent gold down to night. He the ounced to twelve nine. He want to drop there of two tenths of one percent. Crude oil holding above forty nine dollars of barrel up a dollar twenty right now. West Texas Intermediate up by two and a half percent. I'm Charlie Pellet,

and that a Bloomberg Business flash. This is taking stock with pim Box and kapolne Hays on Bloomberg Radio. India's a sent Sex stock index gained nearly one percent today. This follows easing of government's rules regarding foreign direct investment restrictions. Also, this follows news over the weekend that the injury, India's Central Bank governor will step down when his term ends in September. Here to tell us more about India and other emerging markets is Jeffrey Dennis. He is the head

of Global Emerging Markets Strategy from UBS Securities. Jeffrey, thank you very much for being with us. Give us your take on what has happened in India. The announcement, as I said, of the governor of the Central Bank announcing he would be stepping down, and then these changes in direct foreign direct investments, well, certainly the announcement that Mr Rojan is stepping down was negative surprise. Markets attorney been trying to anticipate whether his term would be renewed when

it ended in September. But I think the unbalanced people thought he probably would retain his position, and so his decision to leave, I think is definitely a negative for the market and in fact in our Asian strategy portfolio. Today in my colleague out cut India back to neutral.

So we're taking a more defensive line on India in the short term while we see who replaces Mr John and will there be any let up in what has been a very effective polity in India of being pretty tight on monetary policy so you can get inflation down and then of course ultimately interest rates down as well,

so it's negative. With any question, Jef, I'd like to ask you about this because it's surprising to be a couple of weeks ago, um Rabu Rajon indicated that I don't necessarily want a second term past the three years because prominent politicians close to Modi have been beating up on him. Oh you're you're too tough on inflation, you need to cut rates. And then Moody uh, he wanted uh rag Ragen to stay just let them beat up

on him. And this is the same rag Ragan who left the University of Chicago Boost School of Business to go back home to India and help them out at a time right inflation was high, the rupee was falling. He's made a huge difference. He's the same Rau Rajan okave the speech in Jackson Hall Wyoming in August of two thousand six, basically warning that there are pressures brewing that could bring down the financial system, which nobody listened to. So this is a man of great accomplishment. Why has

Mody not stepped in to ask Ragen to stay? Um, it's not castling that he didn't step in to ask him to stay. He may well have asked him to stay. And I think this looks like the city of royster rajan itself himself to to not seek another term. And that may well be because of the continuous um uh, you know, criticism and sniping that has gone on form not from Mr Mody per se, but were the members of the of the government who may have just had

enough with that. So I think if if Moody had come to him as Theremonid comes to him and said, look, we really want you to stay, I think you probably would have stayed. So um it reminds me a little bit of when Volka La La, you know, left the Federal Reserve and at seven nobody quite knew his his decision or or at the time President Reagan's decision. I think it's a little bit of an uncertainty. But Net

and Nets this was a surprise. I think we all felt on balance the chances of where he would have. As another term, it's a negative this indeed, as you rightly saying, this is a very talented guy, who is highly regarded, who's probably going to go onto other senior positions in global chinance eventually, and his loss to the center Bank unity is big. We just did to see

what policy is going to look like with his replacements. Jeffrey, what about the change in government policy about foreign direct investment? For example, Apple may be able to open their own stores as a result of these change I mean this is an ongoing process. Clearly, part of the key part of the government's reform program is grantually to loosen up the foreign direct investment rules in various sectors. It's been

a stop style process. As you'll know that there's been great disappointment about the great disporce, some dis some way about the speed of the overall reform program, and there has been some stopping and starting previously, including for example, with respect of FDI going into the retail sector, into an insurance sector. I think you'll simply argue this is another brick in the wall, if you like, of opening up India to foreign money as it becomes more competitive,

as therefore its internal growth rate should improve. It's a good piece of news and timed on the day of Mr Roger's departure or that announcement. Anyway, I think that's a pretty good piece of timing because you should view it as as a positivelopment the India story generally. But it's uh, it's I think it's not new at such. It's just part of a process that's been ongoing for

a while. In other words, I think you're implying as a perhaps the government wanted to put out some piece in is because having Ragi Raj and say I'm washing my hands of this, I'm leaving has affected the routebe the ruby has bounded amounts back a bit. You even said you've got more defensive on India, and you've said on this show in the past, Jeff, as have others, that India is your favorite emerging market investment donation. Well, I mean, I think it still is a great place

to invest in in the long term. We're just merely saying that we want to just sit back and observe a little bit take more of a tactically cautious view in the short term to see to what extent polity could change. In other ways, if you would see in the short term growth being pumped up by sacrificing um, a tough monitory policy that gets inflation and the cost of cappel interest right down. In the long term, I think we would consider that that to be a negative.

But certainly it's a tad kill move. We need to see what the replacement of Mr Rajon, who it's going to be, and what the polity is gonna look like. We we strongly believe uh the drop inflation, the drop in interest rates, the very sound monetary policy, the stabilization of rupee has been a critical part of the Indian story in the last three years, and so as well as the more conventional reforms. We need to know that's going to carry on. Until we do, we're just being

a little bit more cautious short tone. Jeff Danis, thank you so much, very much for enjoining us. He's had a global emerging market strategy at UBS Securities, very interesting. He and his team were defensive with the departure of Ragu Rajan as the head of the world The Reserve Bank of India has to watch and see how it plays out. Who his replacement maybe. I'm Kathleen Hayes along with him, Fox's taking Stock on Bloomberg Radio. Coming up

on taking Stock the Brexit vote on Thursday. Will UK voters will they vote to a main part of the European Union? And what happens to the pounds sterling. That's next. I'm taking stock