A number of illiquid scrips, too, have started trading regularly and have attracted huge buying interest. The unabated rise in the Sensex to over 4,700 level for the second time in less than a month has woken up a number of dud stocks as well. These stocks have made a comeback on the bourses after a gap of more than two years.

For example, look at the finance sector, which has been facing a severe test of survival. Stocks of as many as 14 finance companies have outperformed the Sensex and scaled new highs -- clearly, a case of throwing caution to the winds. Stocks of small steel companies and chemicals have also joined the rally and have scaled new yearly highs. What's interesting is the fact that these sectors are still struggling and most of the companies are yet to see an improvement in earnings. These stocks have ridden the general bull wave and have recorded sharp gains.

Although the rally started on the pretext of a revival in the fortunes of a number of industries, key sectors like cement, steel, engineering, chemicals and paper have failed to live up to the expectations and reported a quite a discouraging performance in the first-quarter of 1999-2000. Further, it may be contested that the rise in the Sensex and a number of scrips is on the back of increased domestic and foreign institutional fund buying. And, the fund buying has been restricted to a few stocks in information technology, automobiles, telecom, pharmaceutical, cement, engineering and power sector.

This is not to disprove the theory of economic revival. What we are saying is that as a clear picture has not yet emerged, it may be early days for a full-fleged economic revival. While IT, FMCG, pharma, consumer durables, petrochemicals, telecom, automobiles and auto ancillaries have shown an all-round improvement in topline (and bottomline in most of the cases). On the other hand, industries like cement, paper, chemicals and textiles are still reeling under recession.

Clear signs of a revival or turnaround in the economy would be visible only in the second or the third quarter of the current financial year. Thus, it may be too early to rejoice. The blind rally in the markets has lifted the stocks of loss-making companies or stocks from industries not performing well. Investors, thus, need to be careful before its too late and are left with valueless paper.

-- Team Investor