Shares on the Bombay Stock Exchange have soared to all-time highs, even as landslides and floods triggered by record monsoon rains killed hundreds in the country's financial capital.

To some, those surging stocks reflect the resilience of India's booming economy in the face of disaster.

But others argue that the death and destruction reinforces India's image as a poor, undeveloped country unable to care for its own, shattering its claims to be an emerging economic power.

"Last week's disaster has exposed the city's inability to cope with such crisis," said Majid Memon, a lawyer for a group of prominent residents of Mumbai who plan to file a suit against municipal authorities for failing to develop the city's infrastructure while allowing high-rise buildings to spring up everywhere.

"It is a manifestation of a larger problem -- the manner in which we have ignored the basic interests of the people of Mumbai," Memon said. "If we can develop the technology to make nuclear bombs and launch satellites, why can't we build better drains, better roads, give our citizens better amenities?"

Terrible Tuesday: Mumbai copes with a calamity

Torrential rains lashed Mumbai starting last Tuesday, snapping electricity and telephone lines, halting air and rail services and largely cutting off the city from the rest of the country.

Since then, nearly 500 people have died in Mumbai, mostly in shanties washed away by landslides. Another 500 were killed in outlying areas.

Heavy monsoon rains are not unusual in Mumbai, but this year's downpours were record-breaking -- totaling more than a meter (three feet) last Tuesday alone.

Drains were unable to handle the deluge, and tens of thousands of people were stranded for hours on streets that became rivers. Some died trapped inside cars submerged in water.

Many Mumbai residents complained that authorities were slow in responding, and the city police chief claimed weather forecasters didn't give timely warnings about the heavy rains.

Most deaths occurred in shanties, the warren of narrow alleyways and ramshackle buildings where a third of Mumbai's 12 million people live. The slums bear the brunt of rains every year, but little has been done to get their occupants into modern buildings.

The Mumbai floods occurred just days after Indian Prime Minister Manmohan Singh returned from a visit to the United States, where he boasted about his country's growing economic clout and nuclear capability, and sought Washington's support for New Delhi's bid for a permanent seat on the U.N. Security Council.

The floods' destruction, says Memon, makes India "cut a sorry figure" to the rest of the world.

But as floods swirled in Mumbai's streets, traders inside the stock exchange bid up shares of Indian companies such as Reliance Industries Ltd [Get Quote]., an oil, petrochemical and telecommunications conglomerate, ICICI Bank Ltd [Get Quote]. and Tata Iron & Steel Co.

The 30-share benchmark index of the Mumbai Stock Exchange, the Sensex, rose to a record high of 7,756 on Tuesday, after a weeklong rally that pushed up the index by 251 points, or 3.3 percent. In early trading Wednesday, it climbed even higher, rising above 7,800.

Traders say the disaster unfolding immediately around them has little to do with India's generally positive long-term growth prospects. And besides, they argue that there's little authorities could have done in the face of such torrential rains.

"It's a little unfair to attribute the problem to lack of disaster management," said Abheek Barua, chief economist at ABN Amro India. "If Singapore or London faced a downpour like what Mumbai had last week, I would imagine the situation won't be much different. Those cities also would have been shut."

The Indian economy, which has expanded 6 percent annually in the past one and half decade, has been among the world's fastest growing. This year, it is expected to grow 7 percent.

Foreign investors also seem to have played a role in the market's recent rally. They bought $537 million worth of Indian stocks since the rains started last Tuesday.

"In this bull run, I see investors ignoring every piece of bad news," Barua said. "They are buying into the long-term 'India Story.'"