While political turmoils are not new to the investors in the Indian markets, the current impasse has a deeper implication. Should mid-term elections become inevitable, the stock markets could be facing upto three months of political uncertainty. Election schedules would have to be accommodated into the school programmes and others.

Amidst these developments, the passage of the Finance Bill should lend quite some stability to the markets. Sinha's budget is as good as anybody else could have put together, and the investor really need not worry about the budget until next year.

However, quite a few other imporant legislations are pending to be passed. The insurance bill, allowing a limit of 26 per cent to foreign investors would have added colour to the Indian scene forFIIs. The other pending bills are the Prevention of Money Laundering Bill 1998, and the Foreign Exchange Management Bill 1998. After being introduced in the Parliament, both the bills have been referred to the Standing Committtee on Finance. The committee's reports have been submitted to the Parliament.

The Securities Contracts (Regulation) Amendment Bill 1998 was introduced in the Lok Sabha on July 4, 1998. It went to the Standing Committee on Finance on July 10, 1998 and its report was submitted on March 17. 1999.

This bill sought to include derivatives within its ambit and units or any other instruments issued by any collective investment scheme. The disruption of the parliament would now delay the begiinning of the trading in derivates. Derivative trading would provide a good cover for FIIs and would have enhanced the market image at the global level.

On the infrastructural front, The Merchants Shipping (Amendment) Bill and the Major Ports (Amendment) Bill are awaiting clearance. More important tothe investors is the delay that is now inevitable to the National Housing Bank (NHB) Act, which would have enabled a greater flow of funds to the housing sector, but enabling an easy access to housing finance companies to foreclose bad loans.

This is a dampener for the cement industry. In a similar vein, the bill to carry through amendments on uplinking for broadcasting companies has been stalled. Amendments to the Mines and Minerals (Regulation) Development Act 1957, is another example of how political disruption stalls whatever little progress the government is trying to make on various fronts.

Over the years, the role of the government in business and industry has changed with the dawn of liberalisation process in 1992. In recent years, the investor has been worried more about how damaging government's policies and programmes would have on the economy rather than how it would help. That is because of the poor fiscal discipline and the fact that the government's pockets are empty for it to be activelyinfluencing the industrial growth, except through policy iniatives.

So the investor need not be too overawed by the political developments. Sure, elections would rob the feel-good factor and that, in turn, will drag the Sensex down. But you need to recognise the pattern that underlies the operation of business and industry.

At the very outset, the country has to strike a balance between the WTO regime and national interests (read interests of companies operating in India). In this context, the ruling of the WTO Dispute Settlement Body (DSP) recently on the US complaint against India on quantitative restrictions based on balance of payments consideration should send a message to both Indian corporates and investors alike. India is now likely to be given only 15 months and not uptil 2003, for lifting quantitiative restrictions.

This would translate into import competition for local companies and products, possibly by 2001-2002 itself. Companies operating in India would have no way other than becomingglobally competitive. And investors would save themselves much anguish if they check out the companies that they invest in for such pre-qualifications.

The touch stone for winning companies would be their competence on convergence of technology, creativity and marketing strengths to push deeper into the domestic markets. Forays into export markets, other than traditional tea, diamonds and software, becomes a necessary ingredient to help testing product and consumer benchmarks.

While structured control and restriction from global trade practices have been descending slowly on the corporates, the track record of performance on the domestic markets does not make a very happy reading. The growth rate of sales of manufacturing companies in the private sector has dwindled from 27.4 per cent in 1994-95 to 7.7 per cent in 1997-98. The PBIDT has declined pathetically from a robust growth rate of 35.1 per cent to just 4.3 per cent.

On the other hand, the growth rate in gross fixed assets has continued to bearound 20 per cent. This would indicate that investments have been made despite the slowdown in sales and profits. But the efficiency of operation has been maintained as the PBDIT/sales has been maintained at around 14 per cent in all these years.

However, interest charges have been nibbling at net profits as the PAT/sales has declined from 5.4 per cent to 3.2 per cent. With capital markets being lukewarm, corporates have resorted to more debt funds appear to be the conclusion. That is again corroborated by the fact that the capital issues in the private sector has gone down from Rs.347 mn. To Rs.152 mn. Debt issues has gone up from Rs.132 mn to Rs.303 mn.

This pattern is already known to marketmen, in terms of the slowdown in demand for goods. But a formatted way of looking at the slowdown in sales growth and net profit gives one a proper scan of the last four years. The silver lining amidst this gloomy picture is that the GDP is now expected to maintain a steady course in the next one year. GDP grew at6.6 per cent in 97-98, 4.0 per cent in 98-99, and is expected to grow at 6.0 per cent in 1999-00. The composition of growth in GDP itself is undergoing an interesting change.

The contribution of agriculture to GDP growtrh in 1998-99 has grown to 6.6 per cent from a mere 0.79 per cent in the previous year. This robust growth is what helped push the growth rate of 5.0 per cent. The input from agriculture is now forecast with a growth rate of 2.0 per cent. The lower figure follows naturally after an year of extra-ordinary growth. However, the comparative lower figure will not hold back GDP growth, as the growth in industry segment is expected to go up from 3.71 per cent to 6.0 per cent.

This forecast is based on increase in farm income. The services sector is also expected to post a higher growth rate from 6.5 per cent to 8.0 per cent. All these together will culminate in the GDP growth rate being maintained at around 6.0 per cent.

This is good news for stock markets. The investor must learn to discernthe difference between government actions and the spring roots of the economy. The economy is driven by private initiative, and the figures given above give you a good canvas of the last four years and what lies ahead. It is perhaps in recognition of this underlying current that FIIs have been picking up investments in Indian stocks in the last one week. As the markets panic, it will give even more opportunities to buy at bargain prices. Sure the index could go down to 3242, but it could also take support at 3314. So this is a time not to get scared but to buy selectively. And when you choose, be sure to apply the criterion, I have discussed earlier as to what are the criteria by which you should choose them.

Coalition politics has come to stay. There can be no overnight solution to political game-playing. It will take its own course. But surely, the market will rise again in, say, next four months. And be clear on your target return. Even a 15 per cent return over this period will translate to a 60 percent return per annum .So get ready to go for the kill.