10 reasons why markets are cheering Raghuram Rajan

The Indian rupee jumped over 2 per cent and the BSE Sensex climbed around 550 points, a day after Raghuram Rajan took over as the governor of Indias central bank. Analysts said they had expected the 50-year-old academic and celebrated economist to do his homework, but had not expected him to detail so comprehensive a plan in his first statement. The Reserve Bank of India under Raghuram Rajan has made an "impressive" start, global brokerage Nomura said.
Here's why markets are reacting positively to Dr Rajan's plans:
1) Hope at last: There's hope that Raghuram Rajan will vigorously defend the rupee, which has fallen over 20 per cent since May. Dr Rajan has infused a sense of optimism that he is in charge and that the RBI under him will unleash more financial sector reforms, Nomura said.
2)Capital inflows: The RBI's swap window to banks for new foreign currency nonresident (B) dollar funds is expected to lead to an estimated $10 billion of inflows, Nomura said. This is relatively substantial and could help to fund the current account deficit.
3) Better communications: Dr Rajan said the RBI will maintain transparency and predictability and will be a beacon of stability in so far as the RBI's objectives are concerned. However, the central bank will retain the option to take actions that may surprise markets, he added.
4) Monetary stability is the primary role of the central bank, Dr Rajan said. This means low and stable expectations of inflation. He postponed the monetary policy date to September 20 from the earlier scheduled date of September 18. The postponement comes because the US Fed will meet on September 17-18, where a tapering of quantitative easing might be announced.
5) Financial market liberalization: Dr Rajan said the RBI will liberalize markets, as well as restrictions on investment and position taking. The central bank will take steps to give exporters and importers greater flexibility in their risk management, he added.
6) Rupee internationalization: Dr Rajan said the RBI will open up financial markets more for those who receive rupee to invest it back in.
7) Financial Infrastructure: Dr Rajan said the RBI will improve the efficiency of the recovery system. There is a need to accelerate the workings of Debt Recovery Tribunals and Asset Reconstruction Companies, he added.
8)Inclusive development: The RBI will shortly issue the necessary circular to completely free bank branching for domestic scheduled commercial banks in every part of the country, Dr Rajan said. He also emphasized the need to reduce the requirement for banks to invest in government securities (to ensure the flow of credit to the productive sectors of the economy) in a calibrated way.
9) Households: Together with the government, the RBI to issue Inflation Indexed Savings Certificates linked to the CPI New Index to retail investors by end-November 2013, Dr Rajan said.
10)There could be more ad hoc measures to support rupee in the near term through to the 20 September monetary policy meeting, traders said.