Reuters Market Eye - 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. (http://link.reuters.com/jum87v)
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. (http://link.reuters.com/wyd87v)
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.
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 (http://link.reuters.com/nas87v)
(Reporting by Abhishek Vishnoi)
