The nervousness caused by the UTI imbroglio, and the large sales pressed by foreign institutional investors have led to an evaporation of confidence in the market. Matters were not helped either by the CII's survey of business confidence, which put it at a two-year low. An indication of the state of affairs is the perception that the market has of term lending institutions, and consequently the projects financed by these institutions, is reflected in the extraordinarily low price-earnings ratios the sector commands. Under these circumstances, adverse sentiment is easy to understand. To be sure, the first week of Samvat 2055 consists of only of two working days for the Mumbai bourses and the week may not therefore be an indicator. The clearer trend will emerge only next week.

Nevertheless, there is no question that sentiment has been badly bruised.

Whatcan be done to revive the market? While it is usual to look up to government for help, the first step can be taken by the promoters themselves. Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, allows the promoters' stake to be hiked by 2 percentage points if their stake is below 51 per cent and this option needs to be immediately exercised by the promoters. Of course, this option is not as good as a buy-back of shares because company funds cannot be utilised to hike the stake but still some concerned promoters could help reverse sentiment.

Should the financial institutions bail out the market? If that happens, all it will do is provide further selling opportunities to FIIs. Nevertheless, the only organisations which are flush with money these days are the banks, and at current low values, investments could very well yield a tidy profit. Banks can very well, in their own interests, step in and buy.

Almost all major Indian houses suffer from the excessive dilution of equity.Conversion of equity into preference capital is one way of correcting that and help increase share prices. But the process is long and cumbersome as it is tantamount to reduction of capital and hence requires clearance from shareholders and courts. The only alternative is the introduction of buy-back. Buy-back was already incorporated in now defunct Companies Bill. It can be introduced with minor modifications and particularly with the caveat that group companies cannot avail of buy-back--that should take care of reservations about misuse. Buy back, coupled with banks buying upto their 5 per cent limit, either by themselves or through UTI, will help buoy sentiment. But a sustained improvement will depend on government action to revive the economy.