Markets seem to be reacting cold-bloodedly and are signalling they aren’t ruled by headlines but by bottomlines. Yesterday’s gains rode the above expectation results of Infosys (profits up 50 per cent), which saw the stock rise 7.5 per cent or Rs 237, to close at Rs 3,386. The company has a weight of over 10 per cent in the Sensex. In fact, the technology and communications pack, which have a combined weight of more than 25 per cent in the Sensex rose by 5 per cent on an average—TCS by 7 per cent, Reliance Communications by 6.4 per cent, Satyam and Wipro by over 4 per cent.

There is no correlation between the number of blasts and Sensex movements. If the 13 blasts in March 1993, that left 257 bodies behind, saw it rise by 3.9 per cent, the single blast of December 2001, where 12 people died, saw it fall by 1 per cent. September 11, when not a single Indian died on Indian shores, took the Sensex down 3.7 per cent. So, between blasts and indexes, if there’s one thing that can be concluded without ambiguity, it is this: markets and terrorist attacks have no correlation.

But that would be a simplistic and autarchic view of things. In a November 2005 paper, Terrorism and the Stock Market, G Andrew Karolyi, professor of finance at Ohio State University and Rodolfo Martell, assistant professor at Purdue University, in a study of 75 attacks between 1995 and 2002, conclude an average loss of $401 million in market capitalisation. They also show how “Attacks in countries that are wealthier and more democratic are associated with larger negative share price reactions.” And in an interesting twist, they observe that “human capital losses” like kidnappings of company executives, “are associated with larger negative stock price reactions than physical losses, such as bombings of facilities or buildings”. That leads us to the question: does the fact that human life is valued cheaply in India influence market responses to terrorism? Will markets react differently when India becomes a wealthier country? Do market reactions to Indians killed in terrorism say something about our democracy, too?