Sensex at record high but it is hard to justify current market valuations

Needless to say, it is time to be cautious.

A wave of optimism has pushed the stock markets to new highs. The Sensex and the Nifty have hit record levels, and so have America's key indices, the Dow Jones Industrial Average and the tech-heavy Nasdaq. Going by the conventional metrics of valuation, the optimism is hard to justify. Indeed, it is driven by unusual factors. There is relief, given the favourable outcome of the first round of French presidential elections. If Emmanuel Macron becomes the next president of France as the opinion polls suggest, the European Union will survive. The euro jumped over 2 per cent on the election