The Nifty erased losses for the year last week as earnings at some of the country's biggest companies, including Larsen & Toubro beat estimates and a forecast for the strongest monsoon rains in two decades boosted investor confidence. The market is getting "carried away" and will sputter once the buoyancy in global equities ebbs, Chhaochharia said.
"Earnings are recovering and some high-frequency data points have turned positive but the evidence isn't big and broad enough," he said. While Chhaochharia said he is bullish on equities over a three-year time frame, the market could decline "if the global risk-on trade doesn't remain as strong as it's been in the past two months."
The comments echo concerns raised earlier this year by other analysts even as corporate profitability is on the mend after falling in four of the last five quarters. Operating profits for the Nifty 50 companies have risen 10 per cent over a year in the March quarter, the most since the three months ended September 2014, data compiled by Bloomberg show.