For a second straight day, Indian stocks rise sharply — Sensex +2.2% — with banks leading the way, as new RBI governor Raghuram Rajan has apparently managed to instill some confidence in the market. (previous)
In addition to the creation of inflation indexed savings certificates and the issuance of long-awaited new banking licenses, Rajan will open FX swap lines between banks and the RBI (see diagram) a move BofA says may boost the country's flagging reserves by $10B.
"This is exactly what the market wanted to hear," one Mumbai-based banker says. Apparently so — shares of India's largest lender HDFC Bank (HDB +7.1%) rose 8% Thursday, fueling what Bloomberg says was the largest rally in the S&P BSE India Bankex index in four years.