Time for caution

Higher valuations will not support a sustained rally

Indian equities have seen a correction over the past one month, which has, so far, pulled the benchmark Nifty down 5.7 per cent from its record peak. This follows up on a remarkable rally, which pushed the markets up by 130 per cent from a panic low in late March 2020 during the first lockdown. In addition, there has been frenetic activity in the primary market with a multitude of issues getting over-subscribed and listing at a premium. The rally was backed by easy money conditions, with most central banks including the Reserve Bank of India (RBI) maintaining a combination