With a growth rate in net profit of close to 100 per cent, the stock shot up in terms of its price-earning multiple from around 100 to a dizzy 230. The benchmarking went up in relation to Infy's ADR price. Then came the Satyam Infoway story. Punters jumped enthusiastically into the pricing model followed for internet stocks in the US. Put shortly, we were moving from established modes of valuing into new areas. And we shifted effortlessly into what may best be called speculation.

Did the mania in the US market have no sense? It was the norm to trade in tech stocks. The Nasdaq index went up by over 80 per cent in a year, compared to a rise of just around 28 per cent for the Dow Jones. But one must realise that most of the stocks listed in Nasdaq are believed to be speculative in nature. Investors there see a potential value in the future.

Currently, many companies quoted in high multiples do not make any profits. In fact, the latest results of Amazon could have well provided the trigger for drilling some reality into the pricing risk that has always existed.

Amazon has spent more money and has ended up taking more hits on the expense side. The gain in fundamentals has been only the number of page hits. The sale composition and growth are not too encouraging. Is there any surprise then that the stock price took a correction? And therefore, one should not be surprised if Indian technology stocks too get into a correction mode.

These have reached dizzy multiples of PE ratios between 80 to 130. Many of them command high prices, but not on the basis of actual achievement, or even the chances of seeing better bottomlines. They are there for other reasons one can dream up. These dreams could come true. But then, you should know that the prices are in the clouds. And as the dream breaks, one can only expect prices to descend to earthylevels.

Now, that dream has been interrupted with the prospects of what lies ahead.HLL, which has been earning a phenomenal return on its networth consistently was commanding a multiple of just 50 for a long time. If Infy could earn at say, 100 percent of its networth, you needed to establish a new benchmark.

The market had indeed established that at a multiple of 100. But a rush of liquidity, and lack of enough technical companies forced this multiple upwards. Listing a small percentage in the US markets distorted the picture further.

The truth of this distortion is seen in the current reaction. Without the distortion of liquidity, the scrip was quoting at a price, some two a half times what it ought to be quoting.

This reaction should not surprise anyone. By the same token, the guys who entered the scrip at higher and higher prices, I am sure were aware that they were playing into a speculative spiral. Now that this spiral has been punctured, the question is: what lies ahead?

Let us shift to another ground reality and benchmark. The US stock prices need a correction of at least 20 per cent, to restore the correlation that existed between bond rates and equity prices. Alternately, the bond rates have to come down to 4.2 percent to justify current prices.

Clearly, bond rates are not slated to go down. Hence, the logical step is for a correction in the stock prices.

This will be the first puncture to the tech balloon, promising a new experience to everyone. But quite logically, one would imagine that the current breakdown will induce more and more retailers and others to book profit, built up over months. The fear could be that they would lose all they gained if they did not sell out.

But take a look at the other side of the coin. Would investors jump in with, say, a correction of five or eight per cent down the line? Long-time investors know that once a correction is triggered, it proceeds in waves.

The correction could come to a halt and then move up again. But on every rise, more people would want to get out at the slightly higher price. This is typical market behaviour. And that indeed is the subject of technical analysis. The amount of funds that keep flowing into the market would also be a deciding factor.

Will the bond markets distract the funds away from the equity markets? The US interest rates are likely to be hiked either in February or August. There could well be three hikes in the year ahead. The hike should cool the overheating of the economy, but should not hit the other extreme.

A hike in rates could put brakes on further investments into the US economy. And the growth rate in the economy has not been just a function of consumer spending, but also that of successive investments, which has added to productivity. If the growth rate slows down along with a rise in interest rate, that could spell a disaster for stock markets.

As fund managers look towards such possibilities, they may become more cautious about investing in tech stocks. Again, tech stocks have a great retail following out there. But once fund managers establish the trend, others are bound to follow.

Now go back to the fact that the tech stocks are what that drove the Nasdaq index by over 80 per cent. A correction of 20 per cent would mean the index coming down by approximately 16 percent. That kind of re-rating is bound to affect all stocks including Infosys. If that is the case, what will happen to the high valuations being commanded by scores of domestic software stocks - who have neither technology strength nor the strength of turnover or bottomline - is imaginable.

A meltdown of 50 per cent is not unimaginable. Next week might well see a revival in Nasdaq and technical stocks and the Indian bourses would follow suit. But it is time you realise that you are on the Himalayan heights. A fall could be fatal to you. If you still want to use your ropes or think you can sky down on short selling, here is wishing you merry times.