Stock prices have appreciated substantially in the last six months. The Sensex had gained as much as 20 per cent from the 4000 level in June, 1999 to a peak of 5075 by mid-October 99.

And you get a better perspective if you push your telescope further back. In February the index was at 3200 and it touched this level again by end April. Much of the rise towards the 5000 level was because there was a political lull, before the new Lok Sabha was elected. At this point of time the market had only a few indicators on which to rely. Inflation continued to remain low.

Chambers of business and industry reported more than cautious optimism on surveys of its members. And last but not the least, everyone was betting on the BJP coming back with higher numbers. The troubles in Congress-I lend more confidence to this hope.

The decision of FIIs to decide to invest at this juncture, acted as a judgement to the potential the Indian markets held. Also the fact that stock prices had appreciated since November, 1998 made international fund managers to accord higher rating to Indian investments.

High weight sectors kept the market live. The infotech industry continued to do good, and much was happening on the pharma sector. Higher oil prices on the global scenario lend a bullish undertone to refinery sector. As to the downstream petrochemical sector, including polymer, fibres and intermediates, global prices had bottomed out and on their way up. Commodity prices started looking up including those for steel, aluminium and copper.

In fact, if one were to make a check list, there were a number of positives. And this positive outlook just got confirmed in the quarterly results. And therefore the reaction after these quarterly results, which were more than reasonable did seem puzzling to quite a few. The reaction has to be seen in terms of the handsome gain stock prices have made since December last. One round of profit taking was but natural. It is quite a different matter, that local players had built up inventories and took the carry forward position to Rs 3000 crore, causing concern at Sebi. There was a round of tightening on the norms and that added fuel to the profit booking spree, set in motion by FIIs.

But as of this Friday, it looks like stock prices are buoying once again. It is too early to say if bottoming has taken place. But what one does notice is that prices have started moving up, if only selectively. Even infotech stocks are buoyant, giving a lie to apprehensions about the Y2K problem. Will investors in Indian stocks really stay off the market for fear of Y2K implications, is rather difficult to predict.

Nor do I think one should assumme that global fund managers adopt the same attitude to every market. There could well be exceptions. The concern to take advantage of any dip in prices could well iron out false apprehensions, if any.

The buying spree at the dip at the beginning of November was a pointer to this. No one, indeed really likes to miss a good and low pick and pocket a profit.

For the small investor, the Y2K scare could well turn out to be a god sent opportunity, should global managers shut off their windows. And if the small investor turns out smarter, I am of the view the local trading community is far more entrepreneural. They would not hesitate to join in! With that more or less settled, however tentatively, we need to look at what lies ahead.

There is a new angle to Indian corporate growth, of which I have talked about a few times recently. The contribution of growth in agriculture to corporate top and bottom line is becoming increasingly visible. And in my view the investor can as well bank on this factor to decide his investment strategy. That is to say the weightage you give to agriculture sector growth as against the other negatives about fiscal deficit, revenue deficit and the like.

The Vajpayee government will slowly unfold its package of reforms. But even before it is unfolded one can have a good guess of the limitations it has, and the threats it can pose to stock markets. You will have to keep your fingers crossed as to the tax implications of the Kargil and its aftermath. But quite likely the market will take it in it stride, as it is likely to be a one time impact. More imporatntly the market will also factor in that given the reasonable buoyancy in corporate earnings, the industry can indeed absorb a marginal rise on taxes, if that becomes unavoidable.

But the markets are likely to look beyond these. Right now the business confidence has strengthened than the survey three months earlier. Industry captains do expect the current rate of growth in sales and profit margins to be maintained. Money supply is not a restraint. And industry has learnt to tighten its belts, streamline operations either in house or through mergers and acquisitions. Corporate India is certainly moving up in the learning curve. With such a background, it is difficult to see stock prices going down sharply. The fact that the mutual industry is sizeable now and has several players will also lend a buoyancy by repeated bouts of competitive profit booking and buying in.

Should that result in market heading toward the 5000 mark and beyond again? In my view not necessarily. I do expect repeated profit booking by FIIs uptil December as prices rise. The logic is simple. The strident rise from levels of last December holds much potential, which will not go untapped, before the index is allowed to rise further.