MUMBAI, November 16: The continued fall of the sensex last week has caused more consternation than confusion. Leading scrips took a further beating when everyone was veering around to view that the market had enough of the Hong Kong fever. With scrips not halting in their slide as reasonably expected, the anger of the long-term investor is understandable. After all, investments are made on some reasonably stable basis of valuation and no one likes to see the market behave in a manner that defies the underpinning of such a logic.

Stock prices are valued taking several fundamental factors into account. But beyond scoring for fundamentals, new methods of valuing stocks have made their entry in the investment arena of late. These are management quality and brand value. Management quality commands its own premium, as any Indian investor, who has been mauled by thousands of worthless promoters will tell you. Brand value, on the other hand, is a global concept, now brought and accepted in India.

Thus, you move your stock pricing valuation several notches up to arrive at higher and higher price earning multiples. And, FIIs are not averse to paying a high price for such scrips. This is fine as long as the going is good. But when the FIIs convert their approach from that of growing concern to liquidation, you create confusion, chaos and justified anger. This is exactly what some FIIs are doing right now. They are not into an ongoing business approach, but that of liquidation. Because they face redemption.

The logic -- if you have been hit in the other Asian markets, why not cash in on the profits on Indian investments. In any case, I have seen FIIs unloading even below the price of their acquisition. So, this is not a new phenomenon.And, when it comes to liquidation of Indian stocks, the process could indeed get vitiated. First you liquidate for the sake of redemption; but with higher liquidation in the other Asian markets, the composition of the Indian stocks in the portfolio will rise. For the fund manager, especially the one who relies on his computer programmes, this goes against the principle of risk spreading in portfolio composition. So, you liquidate Indian stocks again, even though they may be good to hold so far as price is concerned!Despite this mindless offloading, Indian stocks are certainly not overpriced, even if they are not attractive at the current level.

This being the case it is not surprising that many of the 400 FIIs have not started buying in significantly. Not every fund is of the hedging type, who has lost in Hong Kong and is trying to liquefy Indian holdings.

This only leads me to think, that there is a more sinister game going around. Stock markets, I reckon is not a simple game of buying and selling stocks, or timing them. It goes beyond into manipulating stock prices. That is what you can do, when you can command pots of money. People now talk of the likely manipulation of MTNL and GAIL prices. Earlier it happened to VSNL. But forget the manipulation of individual scrips. How about manipulating the market itself? Yes, precisely this is what is happening right now. But, the Indian markets continue to drift down. This is despite the fact that India is on a better wicket at current prices. What you are witnessing on the bourses today is manipulators trying to push down prices further and that too in small volumes. It is these marauders, who are have studied the weakness in the structure of the Indian stock markets and are exploiting it to the hilt. When the US market went down recently retail investors flocked to the stock market, picking up bargain buys. Volumes shot up to historic levels. The market did a `U' turn not because of big institutional players, but because of retail investors. FIIs know that such a thing is unlikely to happen in India. With the full knowledge that the Indian markets can be manipulated at will, FIIs are doing what any merchant trader will do. Drive the prices down as low as you can. After all, there is nothing like liquidating your stocks, pushing the market down and picking the same stocks again at prices which are 30 per cent cheaper.

On Friday, the market showed some resistance to being manipulated any lower. Volumes went up in some counters. The punters, it seems, have started their game -- they are buying in irrespective of the fact that despite their buying prices continue to go downhill. This is a process of accumulation, which will reap rich rewards later. As this process gathers momentum, I suspect FIIs will rush in realising that there is a limit beyond which they cannot push prices down. That's when the fireworks will start. Prices will rise in a matter of a few days and traders will make pots of cash. Slowly, the entire flock will do a `U' turn, break out into a race and try to catch up with the early sheep. One more cycle of up will get etched in the annals of the Indian bourses.