Expert Views - DMK withdraws from coalition

M. Karunanidhi (C) in New Delhi May 19, 2009.

MUMBAI (Reuters) - The Dravida Munnetra Kazhagam (DMK), pulled out of the Congress-led UPA coalition on Tuesday in protest against the government's position on a U.S.-backed United Nations resolution on war crimes carried out during Sri Lanka's civil war.

COMMENTARY

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

"With the federal elections next year, political stability is key for all economic reforms. This is unlikely to stall the reform process but it will surely delay the economic reforms to some extent.

The DMK have asked the government to take a decision on Sri Lanka by Friday, post which they will reconsider their withdrawal, so this is a conditional threat.

Markets will remain apprehensive till the government finds out a concrete solution. If DMK withdraws then the government will have to depend on Mayawati, Devegowda and Mulayam Singh, which does not augur too well for the government."

ASHTOSH RAINA, HEAD OF FOREX TRADING, HDFC BANK, MUMBAI

"Political instability is the biggest factor for the markets as of now. The rupee looks weak in the short term now. We could see 55 levels depending on the developing political scenario and the pace at which it evolves"

MAHESH PATIL, CO-CIO, BIRLA SUN LIFE MUTUAL FUND

"The government's resolve for doing reforms would be tested again after this political development."

G. CHOKKALINGAM, CIO, CENTRUM WEALTH MANAGEMENT, MUMBAI

"DMK threat is quite real given the political situation in Tamil Nadu. Now Congress needs support form both SP and BSP to remain in power. Markets are getting scared on possibilities of early elections."

(Reporting by Mumbai markets team)