One would never bet against the market, least of all when there is some volatility and expectations of a sustained recovery as well. Nevertheless, its recent optimism over economic reforms – reflected in a rise of the Sensex by over 25% since the election – and what these could potentially do to the broader economy appears misplaced on at least three counts.

One, stake sales in public sector units are not going to happen easily, and certainly not quickly, as many in the market are anticipating. At least one Congress Party ally, the Dravida Munnetra Kazhagam, has voiced its opposition to any disinvestment. Kanimozhi, the Rajya Sabha MP and daughter of party chief M. Karunanidhi, yesterday praised the “socialist model” and said in Parliament the government must resist the temptation to raise revenue through disinvestment. This stand may have to do with the fact that the DMK seeks an early election in the state and would like to win over many more voters. But readers also would recall that the DMK had, in the previous regime, over-ruled a plan to sell shares in Neyveli Lignite Corporation, based in its home state of Tamil Nadu.

Two, major financial sector reforms will almost surely not happen. Given the global meltdown, caused in the main by cowboy bankers, an economist like Prime Minister Manmohan Singh is unlikely to open the country to known risks. Also, as Business Standard columnist Govindaraj Ethiraj points out, via multiple citations, there is no direct correlation between financial sector reforms and growth in developing countries. To the contrary, financial reforms appear to “raise the frequency and severity of the economic crisis.”

Thirdly, and probably the most important, there is really no evidence to suggest the Congress Party will plunge itself into reforms. So far, its agenda – outlined in President Pratibha Patil’s address to the joint session of Parliament – sets out ambitious social goals, among them full female literacy and slum-free cities over the next five years. And, as if to curb any misplaced reformist zeal in Finance Minister Pranab Mukherjee, the prime minister yesterday specifically asked him to keep in mind the “priorities and programmes” outlined by Patil.

The Congress, traditionally left of centre, has tilted more in that direction over the last several years. The role of the communist parties in the previous UPA regime may be a reason. But it is also clear they saw the political dividends of adhering to the social agenda, set out in the Common Minimum Programme. While the left exited in a huff over the nuclear deal with the U.S., the Congress stayed back to reap the dividends in the elections as voters considered the Congress the real architects of the many social programs.

Also, hearing Rahul Gandhi, the rising scion of the Gandhi family and the heir apparent to Singh, it would be hard to see far-reaching economic reforms on the horizon. He has built a grassroots campaign that focuses on the poor and on rural India. Gandhi sees in this way a long-term hope for the Congress to regain some of its lost magic in the villages. Most reforms, even if they don’t hurt the poor, will hurt the middle class, also an important political constituency that could easily swing the way of the BJP.

Take oil sector deregulation. It has been highly anticipated over the weeks since the UPA was returned to power.  However, with crude oil prices again on the boil, though nowhere near the crazy levels of last year, it is hard to see the government freeing up petrol and diesel, not to mention LPG, prices to market forces.  I don’t think Singh, the party or the entire alliance even want to do that. I think economists, executives and traders alike have jumped the gun on reform. Come the budget in July, they will almost surely feel let down. Yes, we will see many reform measures but nowhere near the kind investors want.