If buying in PSU stocks in the run-up to the trust vote is any indicator, markets are hoping that the UPA-led coalition will sail through.
In the last 15 days, the BSE PSU Index, comprising stocks such as State Bank of India, Bharat Petroleum Corporation Limited (BPCL), Bongaigaon Refinery, National Thermal Power Corporation and others, was up nearly 12 per cent or 659 points, compared with the Sensex, which was up by 5 per cent.
"PSU stocks are a case of buy on rumour and sell on news," said Sandeep Shenoy, strategist at domestic broking firm, Pioneer Investcorp. However, if the government is unable to prove its majority on Tuesday, investors will be quick to press the sell button with uncertainty looming ahead.
Analysts Ajay Parmar and KN Sreenivasan of Emkay Global Financial Services said in a note, "We expect the reforms process to accelerate. We expect the government to come out with concrete steps in further opening up of the telecom, insurance and retail sectors to the global investors and may plan big-ticket divestments."
There are mixed views on the government's reformist agenda and what it means for the markets. Anand Tandon, director of equities at BRICS Securities, says, "A whole lot of stuff could have very well been done anywhere in the last four years and has not been done. So, the issue of reform is best left out of the picture right now."
Meanwhile, global oil prices have cooled down with crude oil futures dropping 11.2 per cent to $128.88 a barrel in New York in the biggest weekly decline since December 2004, after Federal Reserve Chairman Benjamin Bernanke said risks to growth and inflation have risen in the US and a report showed China's economy grew at the slowest pace since 2005 last quarter.
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"Once the vote of confidence is over, markets will continue to be guided by the fundamentals. The bearish sentiment in the market will continue till crude oil prices show some stability," added Shenoy.
The BSE's benchmark Sensex closed at 13,635.4 points, 1.23 per cent higher than the previous week's close. US benchmark index Dow Jones Industrial Average closed at 11,496.57 points on Friday, up 0.44 per cent.
The next week is likely to see a flurry of earnings including SBI, ICICI Bank and Canara Bank.