UPA trust vote key factor for next 48 hrs

In the very near-term though this is a sticky spot the market will have to work through on the political front?

It will but it is indeterminate, if you just try to map it for the next couple of days I don’t see how you can do that because everybody has got his own take on the numbers whether they add up or not. There are lots of other possibilities, which are being discussed on how the Prime Minister might approach this whole situation. The Mayawati factor has come in and that always sends shivers down the markets spine but I am no great expert on politics, but having seen how some of the predictions have come on political events in the past and how they have eventually turned out, my own submission is that is not easy to game these things at all.

Like elections, like markets near-term politics is very difficult to call, so the chances of going wrong on a call, is very high. The market is going in reasonably strong into the event but I think you could be surprised either way by depending on the position that you are taking.

Can we sit on Monday morning and even say there is a 65% probability of one event versus the other, I think not, it is probably closer to 50-50 and that makes it very difficult for trade to pan out over the next couple of days till we get to the resolution for the event because there are still many possibilities up in the air. So it is a toss of a coin it is like gambling, at best you can buy some protection for your portfolios and hope things don’t turn out too ugly for you. But otherwise it seems like it is absolutely impossible to call and my suggestion would be do not try and trade this event. People will inevitably but it is very easy to go wrong with these kinds of predictions and they are far from certain, so stick your neck out and take a bullish or bearish call before the event I think is fraught with a lot of uncertainty and you can easily loss a lot of money.

The point is we come back on Wednesday morning to trade with the event under our belt, so it will almost inevitably be a gap up or gap down on Wednesday and you could be knocked out quite seriously.  

That’s the thing about the timing though. By the end of last week we are a bit momentum building for us assuming things work out to in whichever way by the end of Wednesday. Can we get back to where we started on Thursday or Friday?

It depends on how things pan out. My sense is that you can go on talking about possibilities but at the end of the day there are only two possibilities. Does the government survive or does it not survive and what the market possibilities given one outcome or the other.

My sense is if the government does go through of course you do not know where the market will be going into event in the last 48 hours. So if it goes in strong anticipating that the government will go through maybe goes at 4,250 thereabouts which is not impossible after today’s move in the Asian markets. So if it goes in strong, so there is quite a bit of buying which has happened before the event maybe there could be another 3-4% maybe 4-5% left which was still not be bad which could take to anywhere between 4,300-4,500 depending on how strong the response is and how strong the bout of short covering is. Beyond that does politics itself have the force to take the Nifty up? I doubt it very much. It could happen but it depends on the force of short covering.

If the government does go through some more bears will be squeezed out and therefore its likely that you can get to 4,300, if possible to the 4,500 zone as well but that would be a bear covering rally. Beyond that can the governments remaining in tenure give a long-term or a medium-term bullish direction to the market? I do not think so -for that the macro factors will have to fall into place. What if the government falls on Tuesday night - does not go through with a vote of confidence. My sense is there will be a knee jerk again depending on where we have reached by then. If we is standing at 4,200, the first knee jerk will certainly take it back below the 4,000 mark. Is it likely that 3,800 will be tested? For sure it could be. Will it hold? I have no idea.

But the chances of another straw being added on the markets back if the government fell and therefore breaking the nascent downtrend it’s higher because the whole point is that you are in an established downtrend right now and therefore in such downtrends the pop-ups happen on short covering and the news reaction generally happens on the way down. So the market may latch on to bad news more ferociously and drive prices down much more though again in the medium-term this is the decisive factor.

We are probably still in a band of 3,800 maybe a bit below that to 4,300 depending on this news. We are bang in the middle of it right now and after all it’s all over to crude and global markets. By the end of this week politics would have played out.    

contd on pg 2..