"Markets in India also face domestic uncertainties stemming from protracted slowdown, falling corporate earnings and rising leverage, besides risks of political uncertainties associated with the electoral cycle," the RBI said in its Macroeconomic and Monetary Developments Second Quarter Review 2013-14.
Elections are scheduled in Chhattisgarh, Madhya Pradesh, Mizoram, Rajasthan and Delhi starting on November 11 and ending on December 4. National elections are also due before the term of the current Lok Sabha ends in May 2014.
The stock markets in the country have faced volatility in the recent past amid fears of a withdrawal of the monetary stimulus by the US Federal Reserve and concerns on domestic economy. The benchmark Sensex, which touched 21,039.42 in intra-day trade on October 24, closed at 20,570.28 today.
The RBI said that the decision of the US Fed to wait for more convincing evidence prior to initiating a graduated withdrawal of its bond buying programme "has provided markets with much-needed breathing space."
"However, market uncertainties remain associated with how the debt ceiling issues will play out over the next several months and whether the incipient signs of recovery in the euro area sustain," the central bank said in the report, released on the eve of the Second Quarter Review of Monetary Policy.
Global financial markets also got a breather with the Fed decision to maintain the pace of its bond purchases and its signal that withdrawal of quantitative easing may take longer.
"However, financial markets could be disrupted again when the extraordinary monetary accommodation in the advanced economies is withdrawn," RBI cautioned.


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