BSE Sensex, NSE Nifty: Can Indian equities sustain record-setting rally?

Reuters Posted online: Wednesday, Mar 26, 2014 at 0000 hrs
Mumbai : Whether Indian equities can sustain a record-setting rally this month is becoming a big source of debate in markets.

Among the many arguments being made, bulls like to point out to two key factors: The first, that combined market cap of the BSE and NSE to overall India's GDP remains well below the previous record highs hit in 2007.

* Live: BSE Sensex

The second argument is a simple look at price-to-earnings, which shows the MSCI India trading at 14.3 times forward earnings, well below the 23 times in 2007.

However, bears are bracing for a strong bout of volatility, especially when India kicks off elections next month while the global risk environment remains uncertain.

Check Live Stocks" target="_blank">* Live: NSE Nifty

To these bears, the spike in volatility is best evidenced by a spike in India's VIX, often called a fear gauge that has accompanied the Nifty's record-setting rally.

Both BSE Sensex and NSE Nifty rallied today to their all-time high in morning trade on fresh buying, mainly in realty, metal, auto, refinery and power sector stocks on persistent foreign capital inflows amid higher Asian cues.

India's market capitalisation to GDP ratio