But for that to happen the budget needs to be passed. The BJP is now getting support from DMK and Chautala's Indian National Lok Dal. In the new equations worked out in Delhi will the passage of the budget face new problems? Quite unlikely.

I think, punters will take the opportunity of the forthcoming credit policy to push the Sensex up. Apart from joining the bandwagon of the bulls, seriously and fundamentally you should realise that the credit policy has only limited scope for improving the performance of the corporate sector.

Given the currentcircumstances, the Keynesian prescription for fuelling growth would seem to be attractive to most. Lowering the cash reserve ratio (CRR) will improve liquidity and will certainly help the Government with its borrowing programme. Thanks to good agricultural output, inflation is unlikely to flare up, despite higher money supply growth. As to lowering the interest rates, I am not sure it will lead to further investments.

A recent study on over 1,000 companies showed that these companies' turnover and net profits have risen only modestly. The level of gain is not something very alluring for corporates to make further investments. In fact, the industry has been concentrating more on downsizing, improving operational efficiency and acquiring other units at bargain prices. Expansion is not the key word at the moment, restructuring is.

ICICI's disbursals went up by 22 per cent in the year to March 31, 1999. Of the total disbursals, corporate finance accounted for 35 per cent; infrastructure, oil, gas,petrochemicals and fertilisers 37 per cent; and modernisation and expansion 16 per cent. The disbursals aggregated to Rs 19,225 crore, up from Rs 15,807 crore.

This is an indication that the industry's problem is not availability of funds. The problem is with demand growth on a much broader front. And this is where you have no choice but to go back to Keynesian policy prescription. More growth can come only with more investment. The rate of gross savings has been rangebound between 24.1 per cent and 24.4 per cent from 1994-97. Actually, it declined by a little over one percentage point to 23.1 per cent in 1997-98.

What is significant in this decline is that the household sector's physical savings rate went down by 1 per cent of the GDP to 8 per cent in 1997-98 from 9 per cent in the preceding year. Financial savings rose to 10.03 per cent from 9.8 per cent, which could well be due to salary arrears of the central government employees. The savings in the public sector have been dwindling, with the figurestanding at 1 per cent in 1997-98, down from 3.7 per cent in the first half of the '80s. Savings in the private corporate sector too have declined to 3.8 per cent in 1997-98 from 4.1 per cent in the earlier year.

Consequently, the gross domestic investment has been stagnating between 25.4 per cent to 24.8 per cent in the period 1993-94 to 1997-98. If the economy has to grow faster, there is need to step up the savings rate, which would then flow into investments. But the Government has shown no initiative at all in containing its expenses. The number of public servants has in fact gone up reportedly by 45,000. Nor is there any likelihood of the debt coming down as the proceeds of PSU sale are being used for the purpose of revenue. Faced with the inability to garner sufficient domestic resources, the country needs to rely more on foreign direct investment (FDI). While FDI investments have come down of late, the future does not look very promising either.

For a steady FDI flow, what is needed is a stableand predictable exchange rate. But with the Government in no position to curb the fiscal deficit, the danger of accelerating depreciation of the rupee is ever present. The finance secretary is reported to be in favour of lowering interest rates, as that, in his judgment, will stimulate private investment. But as the country moves towards lower tariff rates, the interplay between fiscal deficit, interest rate and exchange rate needs to be kept in focus. In an economy which is trying to get leaner and more efficient, investment decisions will be taken only after a strict assessment.

What happens when you let go of strict assessments of the evolving business scenario is there for all to see in terms of the steel industry and the FIs' exposure to it.

What lessons does the investor derive from all this? The market may feel relieved that the political threat has waned, but there is no place for euphoria. Euphoria will be misplaced and overenthusiastic trading can land you in trouble.

Agreed, you mustexploit the current sentiment to the hilt. But do not fool yourself that the Sensex can scale up to 4,500 points and stay there. Ride the bull train to profit, but jump off profit booking at the level of 3,750 points. And wait for the next event -- the corporate results.

After the presentation of the budget proposals, stock prices had appreciated and it looked like an exercise in re-rating. A re-rating is possible only on an argument of improved prospects for the economy. Of the latter, there is nothing very promising in sight as yet. Much of the money that is available will go again towards government borrowings. Though the industry will not be starved of funds, the investment logic is not there by a broad measure.

The BJP Government will emerge weaker after this turmoil in terms of the coalition quality and numbers. It will in fact spend more time managing its majority and will have little energy or political power to address the fundamental issues in the economy.