The year 1998 was perhaps the worst in the last three years of the bear phase. There were too many shocks and only one opportunity for a big gain. As many as 21 opportunities were there (based on the Sensex) which provided gains of over two per cent during 1998. The maximum gain was 30 per cent when the Sensex peaked at 4280 in April. During the rest of the year, the gains did not exceed 10 per cent.

It must be emphasised that 1998 threw up plenty of opportunities to buy stocks at unbelievably low prices. Even today, they are there for the grabs, though most scrips have gained 20 to 30 per cent from theirlows.

On the positive side, the new year could have fewer shocks in store for the markets. During 1998, we had three major shocks -- the general elections, the nuclear blasts and the Asian crisis. There may not be a general election though political uncertainty will continue for sometime. The economy is slowly absorbing the impact of the nuclear blasts, while the Asian economies are recovering.

The biggest challenge, however, will be the fiscal deficit and the pick up in industrial production as well as exports. But since this has already been factored in by the market, expectations of a recovery will start building up. This could happen in the run-up to the budget to be presented in February. This is when the big bulls (read foreign and domestic institutions) start entering the markets.

Industry specific positives have already started emerging. Cement is one. Steel could be another. The automobile sector, especially commercial vehicles, is also being tracked closely by the market.

Company specificnews could drive stocks up, again on hopes of a turnaround. In particular, buyback of shares is something that would drive select stocks up. This may happen around the time of results announcements/annual general meetings, when companies are expected to come out with revised buyback proposals. Buyback was a disappointment in 1998. It could be an opportunity in 1999.

If 1998 was a year of software and pharma stocks, 1999 could very well see the traditional bluechips like Reliance Industries, State Bank of India, Telco, Tisco, etc. rising. These scrips have already started moving. Businesses have once again started restructuring coupled with belt-tightening, the latter a common feature in a year of recession.

The blow to the financial sector in the form of large NPAs is something the market has already discounted in the year gone by. The clean-up exercise has already started in the banking sector. A recovery in industrial growth will aid such an exercise in the financial sector. Most banking and financialinstitution scrips have started recovering from their all-time lows. The overall brighter picture could be upset by two possible developments: interest rates and forex situation. The immediate concern is, however, on interest rates as the government's expenditure has risen by 29 per cent in the first seven months. The government has already overshot its borrowing target for the year. Any further rise in borrowings will bring pressure on short-term interest rates.

The trade deficit is widening as exports have dipped by an average five per cent in the first seven months. The fall in exports is largely due to the slump in the international prices of commodities, including metals. The forex reserves (around $ 29 billion) which look comfortable now may not be enough to cushion any further deterioration in trade deficit. A clear picture will emerge some time around April-May. Overall, positives appear to outweigh the negatives. But when positive news starts flowing in, it might be too late to enter the market.