Politics to keep mkts on the edge: experts

Before the US sub-prime crisis comes to an end, the Indian investors will have to learn to live on the edge as political situation on the domestic front is unlikely to improve in near future.

On the sidelines of the Mutual Fund Knowledge Summit at Ahmedabad, Nilesh Shah, deputy managing director and chief investment officer, ICICI Prudential, said the political uncertainty will have an impact on the market and he estimates the market to correct 15 -20 per cent.

"We can expect a 15 per cent correction," adds Shah. On the political stand-off between Congress and Left, he said with CPM and CPI opposed to nuclear deal of the ruling government headed by the Congress, there's is uncertainty over the deal passing through the Parliament.

He further said it is possible to comment on the market position in the context of the global fundamentals and economic (domestic) fundamentals.

The Federal Bank of the US will not allow the continuation of sub-prime rate crisis affecting the economy and will go in for rate cuts and provide liquidity to the market.

On the economic (domestic) fundamentals, it can be said that it is strong enough. But on the political fundamentals, it is difficult to predict.

Meanwhile, A Balasubramanian, chief investment officer, Birla Sun Life, told Business Standard, that the political stand-off between the Left and Congress, on the issue of the Nuclear treaty with the US had made the market highly volatile.

"The volatility will remain in the market at present," commented Balasubramanian.

Touching upon the subprime rate topic that has affected the Indian markets, he is of the opinion that 'subprime' is a matter of concern to the financial institutions, but it's global impact will be seen for a while.

However, he noted that the Indian market is insulated largely on the 'sub-prime' issue and a minimal impact will be felt on the economy.

According to him, the FDIs and FIIs might take a backseat. But Indian market is much more insulated than about three years. "Ours is a domestic market-driven economy, so FII withdrawal will have not much impact," said Balasubramanian.

Moreover, according to him, the market has reached a certain maturity level, as been a chief investment officer, he noticed that 'instead of investors selling shares they are buying shares, bringing the market to stability or growth. But, hedge funds will certainly keep the market volatile for a while.

At the summit a major concern amongst the investors was that of the falling market and the volatility.