Since the Sensex broke down from the peak of 4,322 on April 22, stock prices have certainly gone down. The Pokharan tests pushed the Sensex down by another 100 points from the 3,897 level. While the market was quick to recover this loss, stock prices are finding it difficult to move up higher for want of commitment from operators.

While the quick recovery of the first 100 points was easy, operators seem to have become cautious thereafter. This is clearly reflected by the lack of vigour in the counters of State Bank of India, ICICI, MTNL and even Reliance Industries.

The fear of sanctions still looms large. Operators seem to want to know what exactly isinvolved. Preliminary assessments, of course, have pointed out that government-funded assistance is minuscule and could make no difference to the Indian plans. On the other hand, Clinton opposing fund disbursements at the World Bank could be an irritant. But here again it is too premature to imagine the crippling of India at the IMF and World Bank counters. This is because the US sanctions are getting into more controversy and confusion.

The US government is still in the process of putting through the text of the sanctions. While the interpretation of the sanctions would be left to the individual companies, the pleading of the banks that the sanctions should apply to prospective rather than retrospective cases is a good indication that market sense will ultimately prevail, even over hawks in the Clinton administration.

The difficulty of imposing sanctions in a global village is increasingly becoming clearer as European banks with dollar lines of credit are trying to tie up with Indian banks, cashing inon the opportunity.

Sanctions in other areas like the most favoured nation (MFN) status could spell trouble for Indian exports. While that may be so, political analysts in the US are forcing the Clinton administration to introspect its own moral basis of the sanctions. All said and done, sanctions are likely to just melt away. If that may be the case, why have market operators not taken kindly to accumulating stocks for the pre-budget rally? The skirmishes with Pakistan, more oral than those from fire arms, could be another nagging concern. But here too, if you examine it closely, you will realise that the danger to the stock markets is rather limited.

It is but natural that the Pakistani political class cannot refrain from stroking any apparent injury to the public ego. Pakistan might well use the occasion to win US sympathy and military aid rather than waste away the opportunity in a war. In the same vein, one can be assured that Vajpayee will ensure that his ministers will not be foolish enough toprovoke a war.

There definitely are pending concerns, the solving of which would ensure a soft place for the BJP amongst millions of Indian voters. But all that calls for meticulous and long-term planning. Immediate war can be clearly ruled out.

But you cannot dismiss the apprehensions about the forthcoming budget. Everyone knows Sinha's compulsions. And who knows, the finance minister may well take the Pokharan excuse to escalate tax rates. Have you ever wondered why the FIIs have of late stopped investing in India. The reason could well be very logical.

While Indians may feel euphoric about Pokharan and the achievements of Indian scientists, the global fund managers have no need to be emotional. For a dispassionate global investor, it is clear that taxes would go up and one has also to see what new plans the BJP has to offer to rev up the Indian economic engine.

Over the last few years, the government has tried to push the economy into a higher growth rate. Recall Chidambaram's assessment that thecountry would need foreign investment of $10 billion at least annually to move into the eight per cent growth rate category. While trying to reach that goal, Chidambaram had tried his own formulae. But the latest industrial production figures show that his game plan has failed to push the economy beyond a point. The economy is undergoing spells of more uncertainties.

According to the latest figures, industrial growth in 1997-98 was down to 4.2 per cent as against 7.1 per cent recorded in the previous year. An analysis of these figures read along with corporate results gives one a glimpse of the undercurrents in the economy. While consumer durables have grown, back-up investments upstream have not come through. Possibly, for a prudent sense.

And if corporate performance has been reasonable, the major credit should go to the more friendly interest rates that prevailed. But interest rates are on the way up again. And that should compound problems in the future.

Clearly, India's attempt to launch into ahigh growth rate has not been easy. Several measures have been tried but we are yet to find the key.

Solutions will become even more difficult as an expensive and extravagant government would be tempted to tap into easy customs revenues. Industry be damned.While increasing customs revenue could take care of the government's coffers, the problem of stepping up the GDP growth remains. There are only two solutions to this. First, increase the savings rate, and second, facilitate more inflow of foreign capital.

The latter would call for widening the doors in sectors like agriculture, insurance and infrastructure. The power industry might see a big push for both generation and transmission. Everyone knows this and yet BSES is languishing on the bourses. Therefore, if FIIs have stopped investing, it is not without reason. It makes good sense to see what the budget would look like and what the BJP's game plan for growth is.

The FII investment will therefore start trickling in after the budget. But if theinvestors are not very enthusiastic about building positions, it is quite natural. Stock prices appear to be poised just mid-way. Should the budget provide the trigger, there is room to move up. On the other hand, if the budget is depressing, the losses would be bearable.

Until D-day, it is skating on thin ice.