It is the latter development that is attracting the most attention and so far, at least the FIIs have not disappointed. On Thursday itself, there was fresh fund buying to the tune of Rs 250 crore. Market analysts say that the other source of cash is the retail investor who is present in the market largely through mutual funds. The retail investor has been pouring thousands of crores of rupees into mutual funds over the last six months. In fact, the collection by mutual funds over the first six months of the current year has already exceeded the entire collections of the previous financial year.

Analysts say that the investors' preference is also shifting gradually from debt funds to more equity-oriented or balanced funds. Hence, the recent trends of leading mutual funds launching balanced funds to cater to this demand. This cash flow towards the mutual funds will also ensure a constant fund flow into the stock market.

However, few expect the economic environment to be free of encumbrances. The thinking is that the government must and will take some difficult but urgent decisions in order to stem the adverse flow of the fiscal deficit. One painful decision could be to cut back on subsidies, both on fertilisers and energy, especially LPG and kerosene. Some analysts are sceptical over the likelyhood of cutting subsidies rapidly, given that some important states are heading for the polls early next year.

Some of the relatively simpler decisions to implement will be those concerning the disinvestment process. The process has already been initiated and the government only needs to move faster. The domestic leg of VSNL disinvestment has already been completed and the IPCL stake sale will also be completed soon.

Now the political stability issue has been more or less settled pending only the final allotment of ministerial portfolios. The focus will be on corporate results from now. Individual stocks have rallied on expectations of a better performance, now it is the companies that have to deliver results. It is the corporate performance more than anything else that will determine the medium term trend in the market.

Individual sectors are expected to report excellent performances for the quarter ended September 1999. Auto ancillary will see exceptional growth rates in the current quarter. The results of these companies are being eagerly awaited by the market. The general feeling is that these companies will mirror the excellent growth rates that have been reported by the automobile manufacturers. The initial results from the IT sector have already met or exceeded market expectations. Companies in engineering and EPC sectors are also expected to perform well, besides some of the commodity sectors such as aluminium.