However, the last time it touched this level in 1994, the Index was tired and looking for a reason to crumble. This time it appears as if the market is in fine shape and has a lot of steam left. For me August was a record of sorts for a different reason.

For the first time in more than five years the foreign institutional investors were net sellers in the market and still it went up substantially. I see this one of the most significant developments in the stock market. To go back a little bit, at the beginning of this decade, there were no foreign institutional investors. We had a market which was basically a retail market consisting of thousands of middle class investors. They bought and sold shares and lost or made money depending on their skill and good fortune. The morecautious among them put their money in UTI and with persons like the Late MJ Pherwani in-charge--literally--the UTI was the perennial bull of those days.

And then came foreign institutional investors. The FIIs totally changed the idiom and psychology of the market. Apart from using words like enterprise value which most people did not understand, they did weird things; like buying shares where the price earnings ratios were high and not touching those with low PE ratios. To start with our media and the investors were very confused but ended up taking them very seriously. Even though their investments as a percentage of the total market capitalisation still remained small, their influence on the market was very high indeed.

Looking back there were several reasons for undue power wielded by FII money on the bourses. They had the `phoren' tag for one. To many Indians, even buying a sari in London (probably one made in India) in a British shop is more chic than buying something from an Indian. So when theFIIs spoke everybody sat and listened. The FIIs were also highly communicative. Indian stock brokers are notoriously reticent and since most Indian mutual funds were government-controlled they also spoke little. FIIs on the other hand kept talking about their shares and even organised seminars to talk up their holdings. Their broking associates sent nicely printed reports to hard sell their favoured stocks. So not only did the FIIs do things they told the whole world what they are doing.

But were the FIIs right? Sometimes they were; in fact they were probably right more often than many of us. But I believe that they were very often as wrong as everybody else about the market. One needs to look only at the issue price of global depository receipts made between 1993 and 1996 to verify this point. Every second Indian company was taken into the GDR market at dizzy issue prices. Each of these issues was accompanied by research reports running into literally hundreds of pages. All those reports cried from therooftops that Jain Irrigation, Sanghi Polyester, CESE were God's gift to mankind. We all know the result. Foreign investors lost millions of dollars subscribing to GDRs while foreign lead managers pocketed huge fees.

This is not to say that FIIs did this on purpose. They really believed that Sanghi Polyester and CESE were worth the crazy price at which they were issued in the GDR market. But the point being made is that they were as fallible as you and me who bought these stocks on our local exchanges and making them look like the last word in stocks is stupid. And this is where August 1999 is important. The FIIs are trumping up pharmaceutical and FMCG stocks into four figure levels repeatedly. These companies have very low growth but are hyped up on brand valuation. On the other hand in a growing economy, the companies with assets and good management would grow faster than these companies. But till recently they were rubbished by the FIIs. Of late, more and more retail investors are understanding this andpumping money into good Indian stocks.

It is important for Indian money managers not to follow FIIs like sheep. We Indians are supposed to know the Indian market better and sooner the Indian mutual funds and investors show they have a mind of their own, the better.

My guess is that the FIIs will also feel happy if there was somebody who took a different view of the market as they did since there would be buyers when they want to sell and vice versa. Hopefully the collective buying power of the retail investors exhibited in August would continue and ensure that FII views were not considered the ultimate in market wisdom.

The author is a Delhi-based investment banker and a former country head of Citibank's merchant banking. His E-Mail address is PNVijay@vsnl.com