However, Infosys does not figure in the top 10 picks of HSBC Securites,though they continue to be bullish on the company. Apart from the fourconvergence stocks mentioned above, the top 10 picks include L&T, Grasim,Sterlite, Nalco, Telco and Cipla.

Vasudeo Joshi, head of research, HSBC Securities, who released theinvestment strategy report said the Sensex will reach the 6,500 mark by theend of December 2000. Explaining the reasons for the focus on convergence,he pointed to the global scalability and the convergence potential in theseindustries (media, IT and telecom). ``Big players in these industries willbecome bigger and some new players with innovative products will also comeup.''

Euan Macdonald, executive vice-chairman, HSBC Securities India said FIIs arepersuaded that India is an important destination. ``But the Indian markethas to grow and a liberalisation of the FII norms will be required toattract more inflow of funds.'' Already, efforts to dematerialise tradinghas helped the FIIs to a significant extent, he added.

Apart from the convergence theme, HSBC Securities is overweight onpharmaceuticals, capital goods and cement. It is underweight on FMCGs, oiland gas, while being neutral on metals and bank stocks. While picking thestocks on the basis of top-down and bottom-up approaches, the report pointedout that ``investors will turn towards economic recovery- sensitive stocks.``We advise investors to do so, as it is, in a way essential to diversifyand reduce risk.

Therefore, we recommend to reallocate to value plays that will benefit dueto strong underlying economic demand in India.''

The report has also highlighted the risks the Indian IT industry faces. Thereport says that the risk of a slowdown in US IT investment will be limitedto the areas of ERP, CRM and newer systems. Indian IT companies possess alarge, cheap and good quality resource base (manpower). ``There is evidencethat US companies save at least 50 per cent of costs if they offload work toIndian companies. Also, US companies have to carry out migration,re-engineering, maintenance and e-enabling work if they wish to fight costincreases and improve productivity to compete globally.