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But will it sustain?

Policy moves from the government could help, but crude oil price holds the key to the market rally. The question now is: will this rally sustain?

business Updated: Jul 23, 2008 21:50 IST
HT Correspondent

The 838-point surge for the Sensex, the sixth biggest ever, on Wednesday was not surprising, coming as it did a day after the UPA government survived the trust vote in Parliament in a move that could pave the way for several long-pending market friendly policy measures. Sliding global crude prices and rise in share prices in other Asian markets also helped.

The question now is: will this rally sustain?

“It is difficult to predict how market will behave. If oil continues to soften and global markets rally then the euphoria in the local market may also sustain,” said Sanjay Sinha, chief investment officer, SBI Funds Management.

Oil held the key for market behaviour globally over the past six months. High oil prices led to increase in trade deficit, inflation, fiscal deficit, subsidies and interest rates.

“Softening of oil prices coupled with increased policy response from the government will help us manage these problems better,” said Nilesh Shah, deputy managing director, ICICI Prudential AMC.

Expectations that the government could push for increasing foreign investment in banking and insurance and resume the long-stalled disinvestments program have boosted investors’ sentiments.

But on their own, policy measures can’t hold the market. “If oil touch close to $150 (per barrel) again then it will turn the market negative,” said Rajiv Anand, chief investment officer, IDFC Asset Management.

Also, the government’s intent to carry on with reforms will have to translate into action to keep investors’ sentiments robust, said Anand.