With key indicators ending last week on a positive note on easing crude prices, the markets are now glued to the fast-unfolding political developments in New Delhi, which could decide which way the bourses move this week. Market analysts see this week as important in sustaining the buoyancy seen in the last two days of the week before.
The BSE benchmark Sensex had gained 165.55 points or 1.23% last week, while the National Stock Exchange?s Nifty had gained 43.25 points or 1.06%. This is the second consecutive positive weekly gain on the indices after seven consecutive weekly losses.
The result of the trust vote will decide the future course of the direction that markets will take, dealers said.
Some market players also feel that, apart from political events, crude price and inflation figures will also play their role in determining the market performance this week.
Anita Gandhi, head of institutional business, Arihant Capital Markets, said, ?We think markets are fundamentally sound, as far as current valuations go. But having said that, it is also very difficult to say how the markets will perform. If the UPA attains the magic majority mark, then there are good chances that, along with the nuke deal, the Indian markets will also sail through smoothly in the short-to-medium term.
Apart from the nuke deal, some reforms that were on the backburner due to pressure from the Left parties can also be implemented with the help of the Samajwadi Party (SP) extending its support to the UPA, said a market analyst.
?But if the UPA government fails to win the vote of confidence and the government falls, in that event the market may once again turn volatile and the present positive movements may be jolted,? added Gandhi.
However, a section of the market feels that only political events will impact the market this week as markets have already factored in volatile crude and rising inflation numbers in the valuations. The way the markets witnessed fresh buying and cutting of short positions in the last two sessions and the volumes that accompanied the rally are hints that the market may be betting on UPA winning the trust vote, they added.
Arun Kejriwal, CEO, KRIS said, ?I don?t think inflation figures and oil price will have much impact on the market as compared to how the trust vote will weigh on the markets. If the government fails to pass the test, it will have a negative impact on the market. In the event of UPA sailing through the vote of confidence, the positive run that we have witnessed in last two days is expected to continue for some more time.?
Last Friday, the Sensex gained 523.55 points or 3.99% before finally closing the day at 13,635.40 points, while Nifty added 131.65 points or 3.34% before closing the day at 4,078.85 points.