The data available suggests that the market surge had been propelled more by local punters, call it front running if you like. FIIs are reported to have made selective purchases, joining the party late. The market has gained to the tune of 35 per cent from end November, 1998. The gain has been 18 per cent within this 35 per cent from 9 February, 1999. Now compare this with the gain made in the previous bull run from January 27 1998 to April 17, 1998. This gain was only 25 per cent. More importantly, at the end of this gain, Sensex which was at a peak of 4300 came down to 2800 levels, breaking down through the 3200 level from where it had taken off. The lesson: If you had entered at the 3200level and not booked the profit, hoping that the market would go much higher, you are the loser. The case of those who entered the market at 4300 would be more pitiable. Instead of gaining, you would have eroded your capital.

Sure you would have been sensitive to the developments then and acted upon. Yet is shows the kind of risks the market has.

It was only in the run between December, 3, 1996 to July 31, 1997 that the market had recorded a 59 per cent gain.

Viewed in this background, one should again pop back the question I had asked in this column last week. What is in this budget that the investors can expect the index to keep moving up further. In fact, you need to ponder over the dynamics of the swift rise that market witnessed in the last ten days, post budget. The simpleton investor is likely to think that the market rise is a natural response to the budget. No, it is not. The swift rise is possible because the market is in the hands of powerful operators. Their game strategies are quitedifferent.

Do not ever fool yourself that these players are not capable of assessing what the budget actually means to the market. Sure, there have been sops to the FMCG and pharma sector. And they have been concentrating only on these scrips in addition to software.

The banking stocks took off for more in response to what the monetary policy of RBI would do to their bottom line. But one should also realise that the policy is most likely to be reviewed again. There is no way the central bank can continue to allow money expansion at the rate of 20 per cent for the second year in running. Yes, not even withstanding that the government's borrowing is toned down in its intent. And how far the government's fiscal deficit would be contained is quite a different story. Not only that if the deposit rates go down, investors will seek greener pastures. And banks will have to face a slow down in deposit growth. Credit disbursement would suffer. Ultimately through 1999-2000, we will see bank stock prices dancing morebecause of RBI's monetary measures than real profit growth. And one can see that RBI is tinkering with monetary policy levers more frequently than desirable. Even advanced countries calibrate their measures to keep volatility down and enable a more stable and predictable business environ in the medium and long term.

In any case, the reduction in interest rate, however temporary, will enable corporates to breathe more comfortably. On the other hand, they should also be wary of the threat of inflation, which will again undermine consumer spending.

In the immediate horizon, stock prices have flared up, but not industrial output. The manufacturing sector has grown at 2.6 per cent in January, compared to 7.5 per cent last year. The cumulative growth in the April-January period is 3.5 per cent, compared to the 7.5 per cent posted last year. The basic goods sector posted a negative growth rate of 0.4 per cent during January this year; last year the figure was 7.5 per cent. The cumulative growth is at 1.4 percent compared to 6.9 per cent last year. The consumer goods segment does not enthuse again. It posted a negative growth of 1.3 per cent in January compared to 10.3 per cent last year.

The only positive news is that food grain production has not let the economy down at 200 million tonnes. But sustained growth in agriculture is unlikely. The measures announced in the budget is not enough and private investments in agriculture is still a long way off.

So why is the stock market up? To me it is us because for the big money bags, it is their industry. They cannot be sitting idle. And the only way they can gain is to use every excuse to play their game. And why not? India has proved to be attractive in terms of stock returns in the last three months to entice even the FIIs. And it is easy to sell a dream. The dream of the Sensex racing upto 5000.

It is for the discerning to remember that the stock playing is a zero sum game. The small investor should indeed be wary of getting carried away. Sure the bankdeposit rates are down and he needs alternate avenue. The track record of UTI is not very inspiring for him. Other mutual funds are now making their mark.

But can one trust the capabilities of mutual funds? This needs careful examination. Right now, it is easy for all mutual funds to flout the appreciation in the net asset value. That is because Sensex had reached its bottom in November-December, and could not go down anywhere.

But will the public forget how some funds invested at the peak of the bull run suffered fifty per cent erosion thereafter? The case is not very different now. The measures taken by the present government are indeed in the nature of `carry on business'. Some measures are long term, but these have pretty small outlays. Under these circumstances, it is left to the industry to play as best as they can. I am sure corporates will, and the reduction in interest rate will help. But certainly, that is not good enough reason for the Sensex to race up to 5000.

Small investors should stilltread cautiously. Big operators usually form gangs. They work together to take stock prices up quickly and get out with fat gains. This is quite apparent if you watch the movement of individual scrips. Scrips are chosen, hiked up and then dropped. If you are not inside the gang, there is no way you can gain.

Just one example would suffice. Take Bhel. It was taken up from Rs.230 to Rs.260 in just 3 days and then dropped. If the small investor had entered at Rs.260 hoping that it will go to Rs.350-Rs.400 region, he had lost 20 per cent of his capital.

My advice to small investors is: Enter really at the bottom, as and when the reaction takes place. Be patient. Yes, the Sensex can go up in the next two years to 5000 levels. But do not become fodder to the speculative moneybags in the meanwhile. A runaway hike in Sensex cannot be sustained and will repeatedly correct itself. Patience and scepticism is the name of the game.