The political crisis over India?s civil nuclear deal with the US will not have a big impact on the stock market on Monday. This is what market participants told FE. They are unanimous that the UPA-Left face-off will have a short-term impact on the domestic market which is striving to leave behind the subprime crisis that has gripped global financial markets.
The market is expected to be driven more by the US Fed announcement of slashing of the repo rate by 50 basis points (bps) rather than by the Left parties? threat of reviewing their unconditional support to the UPA government led by the Congress at the Centre.
Devesh Kumar, managing director, Centrum Broking, said, ?The markets have been moving on its own. The political crisis may not have any significant impact on the markets in the near-term. But if Left parties withdraw support to the government, which is unlikely to happen as of now, there can be a short-term negative impact.?
But Ambareesh Baliga, vice-president, Karvy Stock Broking, however, was skeptical as he said, ?In spite of the positive cues coming from the US markets, the political fallout in New Delhi will impact the market negatively. Instability of the government will be considered as a key risk factor by investors and would be factored into the market.?
Not everybody, however, is as skeptical. Sandeep Neema, fund manager at JM Financial MF, said, “The bull-run in the Indian markets until now was driven by the liquidity provided by foreign players and will resume once the subprime crisis subsides.”
The global markets and the US in particular have performed well over the weekend. This would keep the markets positive throughout the next week, Neema added.
A fund manager said the political development might not have much impact on the stock market as it was still not clear whether the government was really in danger.
But bankers have expressed concern. Most said the market sentiment would definitely be hit in the immediate term if the country goes to polls for a new government. They defined the term `immediate? as from ?now to three months??.
Bankers, who spoke to FE on condition of anonymity, said they expected the rupee?already weakening at 41.32 to a dollar due to capital outflows on Friday? to depreciate to 42 a dollar in the coming week. They, however, do not see major policy shifts on policies related to foreign direct investment or institutional investments, come what may.
