Software stocks are the intended focus of this strategy and most openedtrading at the upper circuit reflecting the huge buying interest. But buyingis also taking place across the board, in other sector stocks as well. OtherAsian markets have also surged in tandem.

The catalyst has been the trouble-free transition into the year 2000, whichwas expected to be a big trouble spot for both companies and markets alike,which are dependent on computer systems. But the absence of any glitches haspropelled the indices forward. In addition the rally in software stocks wasalso due to the expectation that these companies will once again see aresumption of orders from overseas companies which had slowed to a trickledue to the Y2K problem. Thus the robust growth rates of 40-50 per cent areexpected to be maintained if not exceeded.

But as far as the Indian markets are concerned the build-up was seen towardsthe close of the year 1999. Trading volumes had already reached new recordlevels, but at the same time there was little disturbance seen in the badlarates, which had indicated the presence of huge surplus funds in themarket.

However, as in all rallies there is need for a sober assessment. First ofall this is a liquidity induced rally, based on certain assumptions. Themost notable is that growth rates in IT stocks will be maintained and thesecond expectation is that the reaffirmation of faith in the Indian economyby foreign investors, which means sustained fund flows. IT companies inparticular have their work cut out for themselves since on an average 30 percent of software revenues have come from Y2K related business; this will endnow. IT companies now have to move up the value chain, which will be morerewarding but also much more difficult.

In addition to the challenges before the IT industry, the engine of thepresent rally, the markets will soon also begin to focus on the Union Budgetand the revenue raising measures that the finance minister is likely to taketo bridge the deficit. The market is certainly in a strong bull grip; butpivotal stock prices are also at an unprecedented level fuelled also by thelarge M&A activity taking place which is unlocking business value.