Indian mkt may see downside due to US govt shutdown: Expert

Seth R Freeman, CEO, CIO, EM Capital Management spoke to CNBC-TV18 about the probability of the US government shutdown and how it will affect global markets. According to him, Indian market may see downside and fall to levels seen yesterday. One can expect a similar reaction to the US market as well.

Also Read: See US govt shutdown, fighting; but no default: Arnab Das Below is the verbatim transcript of Seth Freeman’s interview on CNBC-TV18 Q: How will these Budget negotiations actually pan out? What is the downside for the markets? A: It is fairly hideous. There are only two major parties and they cannot figure out a compromise. Just imagine, if we had as many parties as India what might happen. We have a stalemate, there is a stubborn republican party, a stubborn president, the president’s healthcare act is really his keystone act in the presidency and the republicans don't want him to have that and that is what is driving it. On the other hand, there is a lot of concern that employers will be avoiding taking on full time employees because it now requires even small employers to carry provide health insurance for their workers. So, in Asia, in India the market will decline somewhat somewhere like yesterday and in the morning we will have few announcements from the senators and couple Congressmen that they need more time. Q: Getting to the impact of a potential shutdown, in the last shutdown, we did show a cut of nearly around 3 percent on the S&P 500 but then we bounced back the following month so, how are you viewing it this time? A: I think we will experience the same. It just raises a lot of questions about the quality of governance and this is a key component that the rating agencies now use in terms of looking at the country’s macro situation on a more global basis. It is not just about balance of trade and other deficits but can the government govern. We only have two parties to work with. It is a shame, there are many government employees who had every right to expect their pay cheque and they shouldn’t be left in limbo.