On a roll again

The massive post-Y2K rally on the world's stock exchanges disproves one of the most popular adages of the millennium. It appears that you ...

The massive post-Y2K rally on the world8217;s stock exchanges disproves one of the most popular adages of the millennium. It appears that you can indeed fool all of the people all of the time. Despite the assurances of some of the biggest names in information technology, both retail investors and institutional giants were hedging their bets in expectation of millennial meltdown.

They preferred to believe the doomsayers, who had been capitalising on the fear of the unknown for well over a year in order to carpet-bomb the information technology market with a range of products and services which were actually required only by a small handful of government and corporate institutions who run la-rge networks which use older machines and protocols.

Millions of dollars were spent in securing these, and a few million more were mopped up from individual computer users who were very, very unlikely to start a massive Y2K failure wave sweeping across the world, or even notice that their computers were not behavingexactly as they ought to. Despite that overkill, money held back from the markets until the new year. Even hard-headed market players, it appears, are suckers for apocalypse.The surge on January 3 was seen on all markets around the world, but it was particularly marked in India because foreign institutional investors were keeping away.

They should, in fact, have been bullish about India in the Y2K rollover phase because technology penetration is low here. The most heavily networked nations were the most likely to fall victim to Y2K. In a country like the US, where everything is digitally interlinked, a failure on a supermarket checkout machine could conceivably have compromised the power grid through the banking network. But a country like India, where 70 per cent of the power distribution system is controlled by humans, was a relatively safe horse to back, especially when it had scrupulously installed backup procedures for the 30 per cent at risk. Yet foreign airlines preferred to overfly India onmillennium night and foreign institutional investors decided to wait and watch. While saving their clients from Y2K risk, they have exposed their Y2K illiteracy.

On Monday, the pendulum of unreason swung to the other extreme. The groundswell that swept the markets, led by infotech scrips, is no reflection on the actual performance either of the economy or the IT companies. The boom is likely to be followed by the same disquiet that was felt on Wall Street in the middle of the portals boom early last year, when analysts wondered if they were not working their way towards yet another crash. In the original crash, they had trust funds feeding on each other, showing activity without adding real value to the market. Now, the suspicion is that infotech may be adding products and services, either by development or through buyouts, in excess of what the consumer market can support.

It happened once to Internet advertising, resulting in massive unsold inventories, and may be seen in other areas in the years ahead.This point will be repeatedly pondered both globally and in India. But on the bright side, there are other Y2K-like crises in the offing to keep the sector looking as fruitfully busy as ever.