Mumbai, June 28 (IANS) The Indian equity markets might be volatile over the Greek debt crisis, but continuation of a healthy monsoon, the government's reform initiatives and conducive political climate before the July-August monsoon session of parliament will help soothe investors' nerves, experts have predicted.

"The Greek issue is a six-year-long running drama. Markets around the world will be glued to it for the next couple of days until a final settlement is reached. In India though, the volatility may be seen in the initial few days, the markets seemed to have factored-in the possibilities and are expected to be range bound," Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

"A positive outcome will propel the markets, as it will renew the interest of the foreign investors, who are slowly coming back. The long-term investors such as sovereign, endowment and pension funds, who look at a longer period for good returns, have not left India," Nevgi added.

According to him, the country's strong macro-economic condition in terms of growth, inflation and current account and fiscal deficits will provide a reasonable degree of resilience in the case of spillover from global events such as the Greek crisis.

Even the Reserve Bank of India (RBI) in its "Financial Stability Report" (FSR) for June pointed out that the developments on the Greek debt crisis and uncertainty over the timing of a rate increase by the US Federal Reserve remain the immediate possible triggers for global market volatility.

The Greek government has called for a referendum to let the people decide on the terms and conditions of another bailout.

However, the July 5 referendum will come after the June 30 deadline, when Greece has to repay part of its debt to the IMF (International Monetary Fund).

On June 4, Greece had deferred a payment of 300 million euro that was due to the IMF.

Afer the default, the Greek banking system is expected to collapse, leaving the country at the mercy of the European Central Bank's emergency funding.

"It's a case of being stuck between a rock and a hard place. If the default is averted then the risk of a US rate hike will be more imminent and could take place by September," Dipen Shah, head for private client group research, Kotak Securities, elaborated to IANS.

With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) are expected to be led away from emerging markets such as India.

The picture is however still not that rosy due to the Greek crisis. Analysts cite the short-covering and the low roll-over percentage after the expiry of the June series futures and options (F&O) contract as a sign of investor anxiety.

"For the week (just ended), FIIs were net buyers of more than Rs.8,000 crore ($1.26 billion) plus, albeit for the month they are net buyer of Rs.3,000 crore, therefore suggesting that there was some bit of short-covering by FIIs in derivatives segment during the last week," Sachin Shah, fund manager and head, Emkay PMS, told IANS.

But the prospects of the Indian market's will only brighten if more rainy days continue, forecasted Anand James, co-technical head for research with Geojit BNP Paribas.

"Even as the monsoon progresses, and surprises positively, some forecasters have again highlighted the impact that El Nino could have on the July monsoon. This fact will be keenly observed by the markets," James told IANS.

"A good monsoon coupled with higher crop prices will increase rural incomes, douse inflation fears and renew hope of another rate cut by the Reserve Bank. This will all lead to the restart in spending cycle," he said.

Parliament's upcoming monsoon session and the developing political climate in the interim will decide on the fate of many key bills that are expected to be tabled in the house, among them the ones on goods and services and land acquisition.

Meanwhile, banking, capital goods and auto ancillary stocks are expected to gain in the coming week.

"Bank stocks will be higher due to news of capital infusion in terms of tier-II capital. Capital goods will also see positive movements due to the announcement of government-backed infrastructure creation plans," Gaurav Jain, director of Hem Securities, told IANS.