Mkts may look green in near-term

Today is the fourth day following the rally in the markets and hope this rally will continue for tomorrow also. The big cue today is undoubtedly politics and the markets are looking strong as they believe that the UPA (United Progressive Alliance) will not falter.

The market will rally today if the UPA makes it or may pause for some time and then rally again for tomorrow's trading session. In the near-term, the screen looks green and hopefully it will not be red.

Our markets:

The market is going in pretty strong, I think it believes genuinely that the UPA has the numbers and the market is a smart beast, I don’t think it is swayed by one set of opinion or another. It’s probably worked out the numbers and has come to the conclusion that it will have to be a big surprise, if the United Progressive Alliance (UPA) does not make it this time around.

What you play for this morning is whether the market will rally some more going into the event, if the conviction levels have risen that the UPA will actually make it or will it actually pause today by the end of the day and then keep some part of the rally for tomorrow.

Either way it looks like the market is in good kind of frame of mind and in the near-term you should see some more green on the screen rather than red. Of courses surprises might come later this evening but it appears that it may not 9 out of 10 people on the street will tell you that, they have the numbers and the screen should be green for the next couple of days.

Asian Indices:

Global markets are actually flat this morning; there is not a whole lot to take away from. They are rallied very hard, most of Asia yesterday and Japan that was shut yesterday is catching up today. So that is the only one that is holding up in the green, up almost 1.5%.

On vote of confidence:

The body language seems to be favouring the Congress as well, the United Progressive Alliance (UPA) as well. You are getting that sense from whatever is going around in the newspapers and on the news channels that maybe the UPA does have the edge and the market seems convinced more importantly that would be the case. Whoever you talk to, the general feeling is that it is probably a done deal otherwise the market usually does not stick its neck out to this extent. We have rallied 9% in the last three days that is not insignificant. So we could have a 2%-3% rally with l the marginal punters sticking his neck out but the way shorts have got covered, the way the markets moved up in the last couple of days, I think it is indicative of the fact that people are saying done deal.

The UPA has the numbers and will float through. There will be lots of talk if the government makes it later tonight about what will happen on the reforms path; maybe a couple of things happen, the easier ones are done by the government and that might lead to some kind of situation where people believe that okay four years they did nothing now probably they are doing a little bit whatever little they can. A little bit of confidence, sentiment, feel good might spread around in the market, it is no more than that.

Materially things will not change because this bear market is not about one insurance FDI going up from 49 to 74%. It is about a lot of other things, which have happened around us, inflation, interest rates, macros, earnings and those remain in place. But can sentiment get lifted?- For sure it could and sentiment is one of the important things, which has led us into this very bearish phase. It is possible that sentiment gets lifted and you have a slightly more benign outlook or environment in the markets for a while. That certainly is possible if the vote goes through.

While one has to agree with the assessment that this is not the make call or break call of this market. In the medium-term, I do not think it should be brushed off as a completely insignificant event either and maybe the ramifications will not end with the day. There could be some ramifications which might linger on either up or down for the next six months.  

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