Yes, seriously that is the rumour that was doing the rounds on Friday. That could also well explain why the market did not get on with the recovery; values once again slid towards the close of the trading session on Friday after the recovery on Thursday. But amidst all these rumblings there has been a silverline.The market had an opportunity to define its bottomline in the midst of all the ongoing chaos in the Southeast Asian markets.

During mid-week, and before thepolitical factor became intimidating, the market did discover the price for several blue chips. The price discovery in the current context and in the absence of foreign institutional investors (FIIs) enthusiasm or investment provides great feedback for all investors and punters. Bhel, Mahindra & Mahindra and Larsen & Toubro, for example, showed that enough was enough on the downside.

Again, look at how stocks took off on Thursday when the political clouds cleared. It was clear that the market could go up after all, even without any massive FII support. This was possible because stock prices had no more flesh left to shed.

Coming to FIIs, they are reported to have pulled out a total of Rs 178 crore. Around Rs 120 crore of this had been pulled out on August 12 and August 13. This was the time the Sensex was recovering after a slide in the previous three days, the beginning of a technical correction. A pull-out at this time and level suggests that FIIs were acting more in response to the overalldevelopments in equity markets in the Asian region rather than being country-specific to India.

If FIIs are not coming in despite testing bottoms, it can only be attributed to two factors. First, apart from the fall in scrip prices, there is nothing immediately round the corner to drive the prices up again. Second, it will take at least 4-6 months for the Sensex to be firmly driven up on the back of economic indicators.

Meanwhile, there is more to the FII's cup of woes. For the first time, FIIs could see themselves trapped in a pincer attack. On the one side, the rupee depreciation is expected to accelerate for obvious reasons. On the other hand, the accumulated portfolio investments of over $ 6 billion would have to take a hit as the accelerated rate of depreciation in value cannot be overcome with profits -- for profits are nowhere in sight, what with both the economy and the markets expected to be in the doldrums for at least another year.

One way out is arbitrage through the ADR route, but thathas its limits. The investor, Indian or foreign, has one more problem upfront. The Indian stock market is undergoing momentous changes. It has become necessary for the investor to undergo a metamorphosis. For decades he has been conditioned to think in terms of Tisco, ACC, Hindalco and so on. These scrips do not matter any more and that is the truth. If the investor continued to hang on to them he would be pushed aside to the margins in terms of the returns he could hope to win. The composition of the Indian industry is undergoing important changes. Services are claiming more and more place in the GDP composition, as indeed agriculture, and therefore, agri-related business. Software industry is symbolic of this transformation. Infotech stocks such as Tata Infotech, NIIT, Infosys Technologies, Satyam Computer and Pentafour Software have outstripped most of the Sensex stocks in terms of market capitalisation. A depreciating rupee and the budget sops accorded to the industry in succeeding budgets have seenthese scrips' market capitalisation and turnover shoot up. Early investors have multiplied their gains 8-12 times over the last six months. The industry continues to hold a mesmerising potential. The next safety haven is consumer product stocks like HLL, Nestle, Cadbury and Britannia Industries. It is the centuries old formula of `roti, kapada aur makan'. But the textile industry has gone into the hands of the decentralised sector and the housing industry is yet to take off. That leaves only the food industries in the running for the present.

The bank and financial institutions stocks come next. Insulated somewhat from the ups and downs of the industrial swings, these scrips hold much potential which will fructify in the next 2-3 years. If investors still hesitate here, it is because of the increased risk of non-performing assets (NPAs) as they are forced to lend under difficult circumstances. The cement and steel industries, the two prime movers of industrial growth, have taken a back seat, given thelack of growth prospects in the manufacturing sector in the immediate short term. Even in the longer term, they have to catch up with the build up of overcapacity, which might take over two years. This is true of the transport industry as well. MTNL is the only stock that matters in the communications industry and holds a reasonable attraction. Zee Telefilm has come of age after years of growing pains and is the only representative of media and entertainment sector.

Yashwant Sinha has spoken of his beliefs about industrial recovery and disagrees with the NCAER projections. But given the urgency to kickstart the economy, it would have been better if there had been more urgency to act in releasing the funds for the infrastructure expenditure.

Ultimately, recovery in the cement, steel and transport industries might surface only towards the third quarter in terms of stock prices. This is because the market would need more perceptible confirmation in terms of industrial and consumer data, not just revenuecollections. Commodity stocks have become risky after globalisation.

In short, there is a shake-out in the investment scenario. Pharma, software and financial services are the new brahmins. The investor in turn has to unlearn his old habits of looking at Tisco, ACC and the like, and climb on to the new bandwagon. Survival will now depend upon your ability to adapt instantaneously, whether you like it or not. The sooner you learn to do this, the better.