But the reality is that despite the excitement, beyond a temporary push to stock prices there is nothing really sustainable if this proposal is taken in isolation. Companies in sectors such as pharmaceuticals, software and fast-moving consumer goods are unlikely to enter into a buyback of shares, as they already trade at high price earning multiples of 35-40 times' for software and 30-50 times' for the multinational pharma and FMCG stocks.

As far as the rest of the market goes, individual stocks such as Reliance Industries, Great Eastern Shipping, Essel Packaging, Bajaj Auto, Bombay Dyeing and the major PSU bankstocks should outperform the market in the near term. The rise in the Sensex will be tempered by expectations over the third quarter results for Hindustan Lever, which are due soon. HLL still has a substantial weightage in the Sensex and negative sentiment here will reduce any other positive influence. Gujarat Ambuja Cement will not participate in the rally on account of buyback, as the company has not shown any interest on this count and does not even carry a shareholders' resolution to enable it to effect a buyback. ACC will find it difficult to effect a buyback owing to cashflow problems.

But otherwise sentiment for companies such as ACC, Gujarat Ambuja, Grasim and the steel companies such as Tisco, Jindal and Lloyds will improve on account of the other announcements regarding investment in road projects and other infrastructure investments.

Foseco India: The troubles at Foseco India finally seem to have come to a boil. Ever since the company surprised the market last year with a fall inprofits, its performance has been on the decline. Last year the company which is a market leader in metallurgical chemicals announced a one-third fall in profits, which was below market expectations.

For the second quarter of the current financial year Foseco, reported a profit of Rs 2.73 crore against a profit of Rs 1.38 crore in the previous year's second quarter, seeming to break a falling trend in profitability.

But in reality it had resorted to accounting gimmicks to save it from losses for the period. The company has changed the method of depreciation from WDV to straightline, which has resulted in writeback of excess depreciation amounting to Rs 3.3 crore. Without this book entry, there would have been a loss for the period amounting to Rs 0.3 crore.

There were two major reasons for this disastrous performance; one, the fall in revenues has accelerated. During 1997-98, the drop in revenues was to the tune of one- and a half per cent. For the second quarter, the drop in revenues has acceleratedto 3.6 per cent. Second, as a result of its reliance on debt to bridge its working-capital requirements, interest costs have ballooned to absorb almost the entire operating profit. Profits have also fallen owing to extraordinary expenditure arising from its restructuring attempts. The company undertook a voluntary retirement scheme from last year, but it had not been able to maintain the standards set by other MNCs such as Phillips India in writing-off such extraordinary expenditure in the year in which it occurs. Foseco's main concern seems to be saving its bottomline.

Foseco's fortunes are linked to the steel and foundry sectors (where it has a 38 per cent market share), which in turn is greatly linked to the automobile sector. In the last annual report, the management has issued a warning as to the expectations from the current year, stating that no improvements are being visualised immediately. It had announced its intention of pushing up export revenues, but its efforts have already faltered; exportrevenues were lower during 1997-98 by 46 per cent. After being hammered for several months, the stock had just begun the process of recovery when results for the second quarter were unloaded on the market, and the stock immediately plummeted 5 per cent to Rs 167. And going by the mood of the market there still some way to go.