Markets can be irrational in the short run: What RBI Governor Sanjay Malhotra said as rupee nears lifetime low

What happened: RBI Governor Sanjay Malhotra said financial markets can be irrational in the short run and that the rupee may be undervalued by estimates including the REER. Why it matters: Analysts said the RBI rate hike and shift to calibrated tightening reflect rising cyclical inflation risks and a hawkish MPC stance. Radhika Rao of DBS Bank said the policy shift is modestly constructive for the rupee, though a stronger US dollar remains a headwind.

RBI Governor Sanjay Malhotra said financial markets can be irrational in the short run and that the rupee may be undervalued by estimates including the REER.

Analysts said the RBI rate hike and shift to calibrated tightening reflect rising cyclical inflation risks and a hawkish MPC stance. Radhika Rao of DBS Bank said the policy shift is modestly constructive for the rupee, though a stronger US dollar remains a headwind.