'Market more concerned on economic issues, not politics'

Written by Markets Bureau | Mumbai, Jun 22 | Updated: Jun 24 2008, 04:39am hrs
Bahujan Samaj Partys (BSP) abrupt withdrawal of support from the Congress-led United Progress Alliance (UPA) government will not have much impact on the securities market.

The key economic indicators and the Reserve Bank of Indias (RBI) possible decision to tighten the monetary policy to arrest the high inflationary pressures may instead keep the market nervous in the coming days.

Amitabh Chakraborty, president, equity, Religare Securities, said BSP leader Mayawatis decision to withdraw support from the UPA government will not have much impact, as it will not bring the government into a minority. Moreover, no political party wants elections at this juncture, especially, when inflation has become a roaring issue with all.

More than the political reasons, it is the economic factors like the hardening interest regime to check inflation, which will keep the market nervous. We are expecting 50% hike both in the cash reserve ratio (CRR) and repo rate, he said.

He said inflation is now at 11.05%, which is likely to go up due to high oil prices. He expects that the Bombay Stock Exchanges (BSE) sensex may dip below 13,000 and NSEs Nifty may be range-bound around 4,000 in this volatile market.

Taking a cue from Chakraborty, Vinay Mehta, managing director of Almondz Global Securities, said the market is more concerned about global oil and food prices than the political uncertainties.

He added that even if the Left parties withdraw support to the government on the nuclear issue, the UPA government will not fall if Samajwadi Partys tacit support becomes open.

The market may become nervous only if Samajwadi Party distances itself from the Congress on the floor of the House during the no confidence motion, he said. He said the market will have a relief only if oil prices come to a reasonable level in the global market. Mutual funds also think on similar lines.

A senior fund manager from a domestic industry said the political postures by the ruling combine in view of the general elections of 2009, are creating a political uncertainty. But, he said the UPA government will complete its full term. The market is more concerned on economic issues, he said.