If one looks at the movement in stock indices over, say, the end of December, which was before Donald Trump took over as president, the progress has been remarkable across various global markets. The S&P 500 was up 13% as of September 24th, while the Nikkei 225 was up by 14.4%. Shanghai Composite increased by 15%, while FTSE 100 was up by 13.2%. In the Euro area, DAX (Germany) was up by 18.9%. However, the Sensex was up by just 4.6%. It was lower for SMI (Switzerland) at 3.3% and CAC 40 (France) at 6.1%. East Asian markets registered similar, if not higher, increases, with KLSE (Malaysia) being an outlier at -2.6%. Is there some logical explanation here?

The answer prima facie is no. India has shown the highest level of resilience to the external environment, which can be best described as an economy with the highest growth rate among large economies under stable and low inflationary conditions. Forex reserves have built up to over $700 bn, indicating a strong external position. This strong performance has been topped by a rating upgrade by S & P, which should have been a booster. There seems to be little reason for the markets to behave in this manner. True, any positive information has been greeted with a push for the stock indices for a couple of sessions, after which it has been mean reverting. Is there something which we are missing?

In fact, the index did show an upward movement in the period May-July, after........

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