Vallabh Bhansali and other experts expect mkt to rally

The Manmohan Singh government has won the trust vote. The Government got 275 votes in favour, 256 against and at least 10 abstentions.

With the trust vote out of the way, how will markets trade ahead?

Vallabh Bhansali, Chairman, Enam Financial, feels there will be a sizable market rally tomorrow. "There will be quite a rally as this is a very emphatic victory. However, if crude continuous to gradually go down as it has in the last few days, that will the single biggest factor of relief."

Bhansali feels investors have to wait and see whether the government will go forward with their decisions, as the alignment has rather been opportunistic. He would be very surprised if the government took undue risks in bringing in new reforms.

He feels that inflation is a relative number and gets adjusted as the base effect comes in. "As one progresses into next year, the base effect will actually favour the government, if crude does not go up."

Portfolio Manager PN Vijay said there is a little bit steam left in this rally purely on the back of politics. "The market after touching a low of 3,800 has moved up more than 10% in the last few days. I expect this rally to continue for the next 2-3 days. We also had some rather nice corporate numbers. Investors were very scared of the first quarter results, so that's a positive. Oil is also going decisively below USD 130 per barrel. We have enough meat for the rally. There has been a lot of short covering already taking place. So, we should expect very strong trading in the next two-days."

According to Vijay, are a lot of companies which have been identified by the government, where it holds 90-92% stake, which can be happily brought down at least to 74%.

He also feels that pension reforms are doable as mutual fund managers have been short-listed.

Dhiraj Agarwal, CEO-PMS, Motilal Oswal Securities, said the rally should be quite meaningful. "There has been a slightly over pessimistic scenario, with too many shorts being built in and no substantial buying. A lot of that can change in the coming weeks and months. So, this value will continue for a few days but actually could surprise on the positive side by continuing upwards for a few weeks or even months."

He considers one of the key dampener variables to the market to be oil. "But it has clearly been broken. Every incremental data point which is coming on oil is pointing to slowing demand. Prices are headed further south down for oil, which will be very good for the sentiment in the market."

Shankar Sharma, Vice-Chairman and Joint Managing Director, First Global, said the market might move up higher on this political news. "We are in for a pretty good time. From hereon, it will be probably go 10-15% higher. The trust vote will come as a catalyst. The markets were anyway due for a reasonable rally. This adds momentum to that basic thesis. If there was no threat to the government and this whole event had not happened, it was still headed back up to levels of 15,000-15,500 on the Sensex."

He added that commodities may sell-off and equities globally will do quite well for the next 30-45 days. "As India and China are the worst hit, they will actually do better than the rest of the world."

According to him, in the short-term there will be a big reflexive rally. "If you are a long-only investor, all you need to do is pick out your spots. This rally will be driven by banks and capital goods, which have been directly affected by the commodity rally. However, this is a tough market and it is not going to be easy to make money now."

Surjit Bhalla, Chairman, O(x)us Investments, feels that the vote size and the size of the margin was quite huge. "That should be very comforting for the markets. Once the confidence vote is defeated, the opposition can't bring one up for the next six months. The political disturbance is over and this has ended very positively for the markets."

Bhalla believes that the markets may rally on strength, because the fundamental news ? both on the political as well as economic side ? is good. "The trust vote was one issue the market was faced and the other was the price of crude. Both seem to have been fairly resolved now and there seems to be a sizable shorting in the market."