Why are Indian markets so euphoric?

There is a sense of euphoria in the Bombay stock market index, the Sensex. On Monday, 10 December, the index collapsed by 2%, or over 700 points probably due to falls in Asian markets and the lower close of the Dow Jones the previous Friday. Indian investors were also nervous about results of assembly elections in Rajasthan, Madhya Pradesh and Chhattisgarh, all of which had BJP governments, but exit polls predicted a strong Congress performance. That same evening the Governor of the Reserve Bank (RBI) Urjit Patel resigned, citing personal reasons. The government had been in a nasty fight with the RBI over its insistence on banks to clear up their books, not infusing enough liquidity into banks to increase lending and to hand over its contingency fund of about Rs 10 trillion which the RBI has collected over many decades. With general elections in May next year Prime Minister Modi is desperate to get hold of the reserves so that he can distribute it as largesse. He even threatened to force the RBI to obey his orders according to powers enshrined in Section 7 of the RBI Act. It is advisable not to weaken the RBI because markets would react badly to a weak central bank, wrote R Singhal. Tensions between governments and central banks are common but that is not the reason to take away the independence of the RBI, wrote A Mukherjee. Experts were completely wrong. The Sensex rose by 250 points on 11 December, as if to celebrate Patel's resignation. The election results were declared late the same day and showed that the Prime Minister's party, the BJP lost all three states. The next day the Sensex surged by 629 points or a hefty 1.79%. Why the euphoria? Because the government grabbed the opportunity and instantly appointed a retired IAS officer Shaktikanta Das, with no training in economics, as the new Governor of the RBI. Macroeconomics is not an easy subject to understand. Economists were unable to predict the crisis of 2008 because all their models based on mathematics cannot account for human behavior, wrote A Sheel, a retired civil servant. Central banks should develop macroprudential policies to deal with markets, wrote Prof B Eichengreen. India has many economic problems which politicians find too difficult to deal with. So why is the market cheering the appointment of Das? Because chiefs of public sector banks hope that he will not force banks to clear up their books so that they can start lending to their cronies as before, wrote A Mukerjee. And they hope that Modi will use RBI reserves to pay off bad loans of banks so that they can show profits again, wrote M Sharma. Proves that robbery remains the biggest business in India.