Contrary to the government view, the market believes that oil prices will ease.

In 1982, chess grandmaster-mathematician Dr Jonathan Speelman releaseda collection of the 47 best games of the 1970s. The forward extolled the virtues of "47" for a couple of paras before Speelman mischievously confessed there was no particular reason why he had picked that number of games.

I was reminded of this, when the Sensex passed 15,000 and the Nifty, 4,500 in successive weeks and the celebrations exploded. There is no particular reason to celebrate 15,000; it is no more significant than 14,999 or 15,001.

The media's fascination with round numbers obscures the reality of percentage gains, which are indeed been worth going to town about. The Sensex is up 44 per cent since June 2006 and a mind-boggling 370 per cent since June 2002, for a five-year compounded annual rate of growth of 36 per cent. The last year of net losses was 2002.

It is by far, the longest Indian bull-market. What is more, there's been an increase in momentum. In "log-scale", the Sensex took under two years to double from 7,500 (August 2005) to 15,000. Prior to that, it took 13 years to move from the first brush with 3750 (March 1992)to 7,500.

So, this is not only the longest bull-run in Indian history, it has delivered more momentum than anything since Harshad Mehta's heyday when funny money drove the market from 900 in January 1991 to 4500 in just 14 months!

Theoretically, stock prices reflect expectations. There will be short-term inconsistencies. But in the long run the market mirrors and discounts macro-economic projection. And, surely 15 years is a very long run.

In hindsight, the market has been accurate in its long-term trends. It has been dead right in the three major bear markets since 1991. Each coincided with or overlapped a cyclical downturn.

The 1992 crash was triggered by discovery of the scam but it was also a period of high inflation and zero GDP growth. The long bear market of 1994-99 also mirrored macro conditions. Stock prices peaked in late 1994. GDP growth peaked a year later and stayed ho-hum until 1999-2000. Similarly, the crash of February 2000 triggered a bear market which only ended in 2002-3 when the economy bottomed out.

The 1993-94 bull-run can be justified by the growth that continued till 1995. The 1999-2000 bull run coincided with a boom. And, the latest edition has seen several years of breakneck growth that back up rising stock prices.

Assuming price trends have predictive value, the market doesn't see a cyclical collapse in GDP growth. In 2007, the market has shrugged off higher interest rates, record crude prices, the SEZ mess, lower overall EPS projections, lower export projections, a bigger trade deficit and softening real estate prices.

What are the positives "Mr Market" is seeing in "his" crystal ball? To my mind, the big driver must be hope on the crude front. The oil spike of the past four years is due to uncertainty on first Iraq, and then Iran. Bush is under pressure to resolve Iraq because it is damaging Republican prospects in the 2008 US election. .If Bush does pull out of Iraq, the crude prices may zoom or drop (or both!), depending on the methods he employs.

The government doesn't expect crude to dip. It's moving ahead with the creation of a strategic reserve that will stockpile about 15 days worth of crude. (Oil PSUs hold about 70 days in inventory). It's also tying up long-term gas supply at current rates.

Is the market smarter than the government of India or is it betting on something else? If crude prices ease, that automatically reverses the trade deficit, even if the rupee gets stronger. Lower crude will also have a big positive impact on public finances, if the oil and gas sector turns profitable. Plus, it will reduce inflation..

Is the following chain of logic circular? The market has generally been right when it has exhibited a long term trend. It's suggesting continuing growth now. That growth would be guaranteed if one variable (crude price) went south. Hence, we expect crude prices to dip because the market is up.

So, if you trust the market's movement, you would take a contrarian stance on crude and the refining sector. Crude is above $75/ barrel.

You can sell forward contracts on MCX (hoping it dips) or buy refinery stocks expecting refining margins to climb. The latter seems safer. There cannot be much downside left to refinery stocks.