There is one rule on a rollercoaster ride dont get off mid-way, it could cost you dearly. For speculators braving dizzy Sensex peaks as high as 21,000 points and beyond, January 21s plunge was a breath-robbing Rs 6.66 lakh crore, followed by an equally unsettling fall the very next day. Some got off the ride because they were scared nothing would break the fall, let alone cushion it. Others were forced out by margin calls for which they had no money. The racket of borrowing from all and sundry to take margin-based leveraged positions has seen a quick boom-and-bust cycle of its own. On January 8, high net worth individuals and retail investors traded Rs 16,000 crore worth of equities, much more than domestic institutions, and thrice their average daily turnover just a year earlier. The monies were bet on the eternal Indian inflows story, a cartoon version of which holds that dollars will keep gushing into India, forever raising stock prices, since foreign investors have a one-way bet. Its the Tina factor there is no alternative (to investing in India).

Well, the market doesnt spare simplistic thinking, and it did not. Now that it has recovered quite some losses, talk has shifted to whether this is a rebound more than just a relief rally. With momentum speculators nursing their injuries, the question amongst value investors is whether price-earning (P/E) ratios justify hopping aboard. Some see steady value at Sensex 15,500 levels. Others, tracing forward earnings on an optimistic assumption of 2008-09 growth, and taking into account a 20% P/E premium on Indian stocks among peer markets, see no overvaluation danger even at 19,000. Anything much over this level could bring speedy corrections in its wake, unless the economic scenario changes. The $20 billion of IPOs lined up will add its own swings. All the freshly listed shares will do the market good by expanding the asset pool and attracting more investors. Newly introduced derivatives, meanwhile, should spur the efficiency of price discovery.

As for the larger economic picture, while the usefulness of fiscal and monetary tools are still under debate, many analysts seem willing to give them the benefit-of-doubt till more is known. As for domestic concerns over India decoupling from the US, it now seems clear that while the Indian economy overall is reasonably safe from the ravages of an American recession, barring a sector or two, the capital market cannot pretend not to be exposed to the vagaries of global capital flows. Yet, foreign inflows into Indian assets logically ought to continue on the performance of local firms, whose investment levels are yet to flag, and business conditions remain good for the most part. If India avoids chest-thumping, and eases the way for the economy to get ahead without having to do any drama, the optimism can be justified.

Remember also, that market regulation is significantly better than a decade ago, and Sebi has demonstrated a vigilance that should reassure those who would rather have scams pre-empted than discovered after they wreck market confidence. Investors who know what theyre doing do not feel giddy on the rollercoaster. India may not be a Tina market for investors worldwide, as none ever is. But, as things stand, it is an attractive choice.