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Mumbai, July 21 Amid the steady stream of reports of hectic political parleying and horse trading in the Capital, the financial markets on Monday closed on a cautiously optimistic note ahead of Tuesday’s confidence vote.

With the situation in such a fine balance that even two or three Members of Parliament could influence the outcome of the vote, the expectation was that the markets would close in the red.

But the Sensex opened positive and, after much volatility, tacked its way through a 300-point intra-day swing before closing 1.57 per cent higher, at 13,850. The Nifty closed at 4,159, gaining 67 points.

The market has already factored in any impact of the confidence motion because it is not a development over the last three days or so, said Mr Sundeep Bhandari, Regional Head, global markets, South Asia, Standard Chartered Bank.

The rupee appreciated by 15 paise against the dollar in thin trading, while the bond prices rose.

“Since the trust vote is tomorrow, the market counted on short-term factors and discounted politics. Crude oil remained stable and the Asian markets were positive; the market also has a feeling that the government will survive,” said Mr Bhavesh Shah, Vice-President(Research), Asit C Mehta.

However, volumes were thin. Turnover in the NSE cash market was Rs 10,640 crore, the second lowest in July; F&O volumes were Rs 43942.21 crore, the third lowest for the month.

However, both Sensex and Nifty futures closed at a premium.

“People are anticipating that the trust vote will sail through; and since the market is oversold, there was lot of short-covering,” said Mr R. Balakrishnan, Executive Director, Centrum Broking.

FIIs were net sellers for Rs 62 crore and domestic institutions net sellers for Rs 231 crore

“There was short-covering in the defensive sector, especially in pharma and banking, but it is too early to say anything. Tomorrow, there could be volatility or may be even a relief rally,” said Mr Satish Ramanathan, Head of Equities, Sundaram BNP Paribas Mutual Fund.

Among the indices, BSE Bankex rose 3.88 per cent, while Healthcare gained by more than three per cent.

BSE PSU was up 1.45 per cent. Over the past three trading sessions, the Sensex has gained 10.13 per cent from its low of 12,575 last Wednesday.

The rupee rose due to low oil prices and the upswing in the domestic stock market, said dealers.

Its movement on Tuesday would depend on the outcome of the trust vote. If the government wins, bullish sentiment would prevail, said forex dealers.

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