Cheer in the markets

The stock markets responded positively to predictions in the exit polls that the incumbent National Democratic Alliance government would easily win re-election. Over the course of trading on Monday, market indices hit new all-time highs and posted their biggest one-day gains in 10 years. The rupee appreciated by 49 paise, the biggest single-day gain in two months, to close at 69.74 against the US dollar. Some exuberance at the prospect of a stable government is understandable. However, it is relevant to ask whether an over-reaction to opinion polls — or even to the final results on May 2.....

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