Indian markets to rally on govt confidence vote win

By V. Ramakrishnan

MUMBAI, July 22 (Reuters) - India's rupee and stock markets are expected to rise on Wednesday after the government won a confidence vote ensuring its immediate survival, with analysts expecting it could revive some of its stalled economic reforms.

But economists expected rallies to be short-lived as concerns about inflation nearing 12 percent, high oil prices, slowing economic growth and rising interest rates are likely to return to the fore now the political uncertainty had faded.

"The markets will be relieved, and now that there is no uncertainty, investors will turn to the fundamentals, like inflation and oil and the global markets. Foreign investors will look at how further reforms take place," said Andrew Holland, head of the strategic risk group at DSP Merrill Lynch in Mumbai.

"The stock market is likely to go up by 1-2 percent in the morning, then we will go back to the fundamentals, locally and globally."

Ahead of the vote on Tuesday, which the government won by 275 votes to 256, the rupee INR=IN ended at 42.73/74 per dollar, weaker than Monday's close at 42.68/69, but the 30-share index .BSESN closed 1.84 percent higher at 14,104.20 points.

The stock market had climbed in anticipation of a government win for four days in a row ahead of the vote, rising off a recent 15-month trough of 12,514.02.

American depositary receipts also rose sharply after the vote. See [ID:nN22364802].

The Congress-party led coalition won the confidence vote late on Tuesday with the help of regional parties, after splitting with its communist allies of four years, who pulled their support in protest at a nuclear energy deal with the United States. See [ID:nISL288787].