Sensex and Nifty are making fresh life highs almost every other day, and this seems to have become the new trend on D-Street.

Today, Sensex recorded a fresh intraday high of 22,172; and also record closing high of 22,095.30.

The 30-stock index gained 40.09 points, or 0.18%.

Nifty also saw record closing high, ending the day at 6,601.40; up 11.65 points, or 0.18%.

BSE Metal, BSE Cap Goods, BSE Oil & Gas were top sectoral gainers in today’s trade.

Top gainers on the Nifty were SesaBSE 4.23 % Sterlite, HindalcoBSE 3.77 %, JSPL, IDFCBSE 2.91 % and BoB.

Sahara stocks were in action as the Supreme Court set a condition of depositing Rs 10,000 crore for granting bail to Subrata Roy.

The apex court agreed to defreeze bank accounts of Sahara companies to raise Rs 10,000 crore.

Sahara Housingfina CorporationBSE 9.97 % gained 9.97% to Rs 42.45 on the BSE.

Sahara OneBSE 5.00 % Media & Entertainment surged 5% to Rs 59.85.

BSE IT index lost 79.54 points, or 0.90%, to close the day at 8,722.65.

Big losers in the pack were Tata Consultancy ServicesBSE -2.21 %, down 2.21%; and InfosysBSE -0.21 %, down 0.21%.

Talking about the prevailing scenario on Dalal Street, it’s on a high no doubt.

But is the current rally sustainable? Are the markets running ahead of themselves? These are some of the questions bothering investors.

Most experts are of the view that the Nifty will scale 7,000 ahead of elections; while others see it in a range of 21,000-22,000 for the said period.

Here are five factors that can sustain or break the rally:

Stimulus from China and ECB on the cards

The European Central Bank could buy loans and other assets from banks to help support the euro zone economy, Germany’s Bundesbank has said, as per a Reuters report.

This marks a radical softening of ECB’s stance, and seen as a big boost for the economy and the markets, especially at a time when America is tapering its QE stimulus.

Also, market is abuzz with talks that China may take policy steps to stabilise their economy. This means a stimulus, and a development that would provide a major boost to emerging market economies.

Again, these are just talks for now, and there is no concerete evidence of the same happening.

Market cap to GDP ratio

The combined market cap of the BSE and NSE to overall India’s GDP remains well below the previous record highs hit in 2007, reports Reuters. (see chart at the end of the story).

Also, a simple look at price-to-earnings shows the MSCI India trading at 14.3 times forward earnings, well below the 23 times in 2007.

These points make a strong case for the bulls, which see more room for a further upsurge on the stock market.

Election uncertainty

Foreign institutional investors have pumped in close to $2.5 billion into the Indian market over the past one month.

FIIs seem to be banking heavily on a Narendra Modi-led government at the Centre. It is said to be the hope of reforms being introduced in many sectors by the new government that is making FIIs go gung-ho on India.

But then one cannot lean much on poll predictions. In 2004 elections, the opinion polls had predicted the NDA to win nearly 270 seats, but the alliance managed to win only 189 seats.

In 2009, the polls predicted NDA to win between 175-195 seats, but they managed to win only 159 seats.

This lingering uncertainty may well dampen the market sentiment.

Rallying too much on hope

Investors seem to be hopeful that the new government, especially a Nar ..

Source : Economic Times