But apart from this sporadic buying there seems to be very little activity or interest from the FIIs as yet. FII fund managers and some leading brokers are of the opinion that hoping for fresh funds under the present economic and political circumstances is a utopian hope and fresh funds will not be forthcoming or in trickles if it comes.

In the event that there are no signs oflarge FII investments coming in by the end of January then the market is very likely to collapse under its own weight. The next couple of weeks will be crucial due to the fact that speculators have built up huge outstanding positions in several counters that already appear overheated and are bearing huge carrying costs for the same. Outstandings have more than doubled to Rs 900 crore and money rates at present are 24 per cent and are expected to be 36 per cent by this weekend. Speculators entering at this point are very bullish indeed but also will be looking for very quick returns to justify the high holding cost. The slightest hesitancy from FIIs to invest or even if domestic FIs step up sales will trigger a collapse in the market as speculators will be quick to cut losses. The immediate fall in Hindustan Lever on Wednesday came about soon after it hit the all time high and was a good indication of what could happen when the financial institutions particularly UTI decide to sell in a big way.

CadburyIndia

Ever since speculators realised the market's folly in underdiscounting Cadbury India's stock following the announcement of its annual results last year the stock has been appreciating without interruption. Now that the stock is trading at a historic price earning multiple of 63 times analysts have now begun to label the stock as over priced. The only factor still ensuring an element of interest from speculators are persistent rumours of a bonus issue along with the annual results. The stock has spurted by 44 per cent in the last two months to the present high of Rs 515.

For the first half of the financial year ended December 1998, Cadbury India had reported a Rs 10 crore net profit. For the full year the net profit is expected to be in the region of Rs 23.5 crore, an increase of 27 per cent. So on even on expected earnings the stock appears to be very expensive as its forward multiple is 50 times. Topline growth is expected to be in the region of just 15 per cent, which is not much consideringthat the company usually adjusts selling prices in line with inflation. Last year the increase in prices was to the extent of 8-10 per cent. Even if the same rate of growth is maintained in profits the forward multiple for 1999 is around 40 times which is still considered to be high.

The company is expected to benefit from the softening fo cocoa prices which has been falling most of last year as well. Fears that Cadbury had locked into high cost raw materials owing to a hedging miscalculation have proven to be unfounded. According to analysts, the company has said that they will benefit from falling raw material prices. Further, according to industry experts Cadbury has done the right thing in changing its product mix and moving away from confectionary products and has decided to increase the volume of chocolate sales, where the operating margins are better.