April month saw Sensex trading near its all time highs. However, mid and small caps continue to trade at more than 15% discount to their all time highs. While the valuation of large cap looks over-stretched, mid and small caps look a bit under valued. This is a kind of divergence which is pretty rare to see. Other flavour of the season are the general elections. There is always a risk of market instability due to any adverse outcome of the elections. Markets do not like uncertainty. As long as there is a stable Government at the center, we don't anticipate any adverse impact on the markets. However, if there is a weak Government that is formed at the center, there is a possibility of markets going down in the short term.

After a 9 month downward journey, equity markets were quick to recoup all the lost ground. Markets rallied by more than 7% in March. The Sensex and the Nifty are at the record highs now. The main reasons for this rally were strong inflows from foreign investors, hopes of a stable government at the centre, a rise in rupee against the USD, and expectation of a rate cut policy in April.

Current market condition can be understood better if we analyse the following factors:

1. Improving Micros - Corporate earning is improving steadily over the last four quarters. It has improved by around 11% from the year-ago period. Most of the analysts expect this momentum to continue and earnings are projected to grow steadily over the next 2 to 3 years.
   
2. Worsening Macros -  There are some key macro factors that have …

It’s the first time in 14 years that India’s credit rating has been upgraded by an international agency of repute. Moody’s upgraded India’s sovereign rating from the lowest investment grade of Baa3 to Baa2. It has also changed the outlook from stable to positive. It is on the expectation that continued progress on economic and institutional reforms will, over time, enhance India’s high growth potential. A rating upgrade for India …