However, investors had several lessons to learn during the week. The underlying strengths of the market came to the surface repeatedly. Marketmen were in a hurry and ready to jump the gun, when it came to going long at crucial points. Not only domestic institutions and traders, but even FIIs did not want to let go of the opportunity of logging in at low prices on what they thought were undervalued scrips.

The moment the Pakistani prime minister dashed off to Washington, the market assumed that the curtain was about to be dropped on Kargil. Stock values shot up with a vengeance for having waited in earlier, in a state of suspense.

But the very next day, it reversed its opinion. This swing of opinion went onand made trading indeed highly risky, except for a handful of seasoned veterans. Leave alone traders, the market risk posed serious threats even to long- term investors, since values could take a hit should the war break out in full.

After 60 days of fighting on the border, most analysts have now realised that it would now not possible to predict the turn of events in Kargil accurately. This is the opening of a new chapter for investors. India will now have to learn to live with the new Taliban element in Kashmir. While Kargil is not unmanageable, and could well become a matter of routine for the political and military establishment, investment managers will have to put a value to this element and proceed from thereon.

But at the same time, one needs to note a few important undercurrents on the war front. The visit of Pakistani emissary Niaz Naik is of significance. His visit was cleared quickly for landing and he had a meeting with the Indian Prime Minister, and his security advisor.

Certainly, muchdiplomatic efforts are underway. And they would make sense. The Kargil conflict may not be resolved for all one knows before the snow fall in September. You could read a little more into this with benefit. The Pakistani military may not be willing to vacate the territories that it has taken now in Kargil and could hang on to it in the winter.

After all, the border about 120 kilometres long, temperatures drop to minus sixty degrees, and with snow all around, the Indian Army can hardly fight any battle at that time.

Anticipation of this possibility will itch the Indian Army to cross the LoC before winter sets in. Because this seems to be the only way to defeat the intruders, if they refuse to give up, backed by supplies from the Pakistan. Alternatively, Indian military could open up other fronts in the plains in September.

Right now, investors need to give some more time to see the developments after the Washington visit of Nawaz Sharif. Surely, an angle of face-saving is involved both for the politicaland military establishment in Pakistan, even if it has accepted that it must withdraw from Kargil.

And they need to give the people in Pakistan time to accept the new reality. The $100 million loan from IMF scheduled shortly has a high potential to defuse the crisis. The consequences of not getting this loan are quite serious and Pakistan has to convince IMF that it is not throwing money away in military adventures.

On the Indian side too, there is bound to be the realisation that a diplomatic solution has as much merit as a military solution. Pakistan has tried to internationalise the issue. But even without that, there is no denying that it would be healthy to try and see if the border issue can be resolved.

Such a resolution could take much time and be protracted. And who knows, everything can cool down in the meantime and would revert to `business as before' syndrome. The Kashmir issue has been like an volcano erupting now and again. That Pakistan keeps kindling the fires here repeatedly could onlyreflect on the politics and economy of that country.

With Pakistan having been ruled for over 30 years by military, no one knows how soon or how often it would rattle the Kashmir issue. It is not impossible that the issue would die down for the present, once the Kargil intrusion is resolved.

Indian investors have no choice but to live with these realities. Should a war break out, it is believed that it would be a short one. But even then one should not overlook the possibility of rupee depreciating some more and the fear of a fund pull-out from India. The NRI deposits are quite sizeable and any withdrawal here coupled with a pull-out from FII could pose a serious problem.

Given that the current upsurge in the Indian economy is believed to be the beginning of a period of growth that could last for the next three years, one would imagine that the FIIs are in here for the long haul. But that is only up to a point. If stock prices keep moving higher and higher, before their fundamentals catch up with thenew valuations, the market setting would be ripe for profit-taking. And even FIIs would not hesitate, especially if alternate and competitive opportunities emerge in other countries.

In the ultimate analysis, it is nice to see all stocks racing northwards - Hindalco, Sterlite, Telco and such others. But the higher and faster they climb, they indeed become potential candidates for profit-booking. If you need convincing, look at what happened to pharma stocks. They went up on the news of new patent regime, but profit-booking came inevitably. Logically, therefore it would make sense for you to keep booking profits, where stock prices are outpacing their fundamentals by a large measure.

The difficulty is in assessing the fundamentals. In an economy that is promising, it is difficult to judge how much headway a Telco, a Mahindra & Mahindra or TVS Suzuki can make. Companies have been successfully rising product prices, sales are expanding in automobiles, polyester, metals, plastics and now chemicals. Your bestguide then is the market itself. Let stock prices run as high as they would, but the moment they show signs of fatigue, get out. You can always back in again. That is one good way to keep up with a dynamic market.