Stocks and Stock Markets

In my last post i talked about Indian Law System which i do not understand at all. There are two more things which i do not understandl. The other one is Stock Markets. this post is influenced by the book i am reading on Stock markets and my own observation for the past few years. To begin with Stock Market just reminds me of a song by Bon Jovi "Hey God! -- What the hell is going on?" the only thing i understand is that stock markets go up and go down, the swings being judged by the indices. A quick questions pops in my mind what makes the indices go up or down...the answer is the Stock prices of the companies that makes up the index say BSE-30 index. Ok! And the stock prices are governed by the performance of the company Rite? Well the markets seem to think otherwise. For the past 3-4 years i have observed (most of the time) even though a company declares positive results for the quarter the market responds in the other direction almost all the time...the logic? i have no clue! Then u have those analysts.. These guys are real pro . i have heard frm lots of ppl "If u hear their words carefully, u will be able to predict where the market is heading the next day". So a question that comes in the mind of naive investor (say) like me is -- Then what drives the markets? thats a million rupees question (i do not like Dollar) and the person who can answer that, in my view has made a lot of money on the stock markets. There is one incident i remembered in which the markets went down by over 1% around 26 Jan 2002 (i do not remember the year correctly) and the reason given by the analysts on a major financial TV was General Padnabhan has called a press conference...............if my memory is correct the Army has been calling for the press conference earlier too on the eve of independence day.....so what was special in that? NOTHING ... i think they just ran out of ideas to take the markets down. Coming back to present times, markets have been touching new heights till yesterday....i did not get the point for this phenomenal rise coz as my frens tell that the "Mid-caps" (i have no idea what the hell they are) have not risen much compared to the rise in markets and the rosy picture that the RISE paints. Also this reminds me of the scams that have always followed with the phenomenal rise in the markets. I hope this time this isn't the case thanx to SEBI for tightening the regulations even further. Having said that, as i said in my earlier post that ppl think of loop-holes in the laws before they come into effect .. lets hope this isn't true this time for the benefit of small investors. PS the books I have read are --

1. A Beginners Guide : Profitable Investment in Shares
2. One Up on Wall Street - How to Use What You Already Know to Make Money in the Market (Currently Reading)