Why have markets rallied while the economy flounders?

Fund flows into local stocks seem to have very little to do with India’s economy, or for that matter, its politics. Political uncertainty looms large, Parliament is paralysed by squabbling over coal block allocations, the government seems to be unable to muster the political will to initiate reforms or indeed raise diesel prices, growth estimates are being revised down, and inflation remains stubbornly high, but local equities are unfazed by it all and have continued to rise.

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