One argument is that Reliance has been single-handedly taking the markets up, which is partially true because the stock alone has gained 140% in the last 4 months. RIL went on to rally to scale valuations of Rs.14.50 trillion. Even without the monetization, digital and deleveraging stories, RIL has enough up its sleeve to keep the street tuned in.

The real reason the markets are continuing to rally is the low rates on bonds. Here is why! If you thought that low GDP growth was not conducive to equities, think again. Negative GDP growth leads to negative real yields on debt and therefore equity looks safer and smarter. That is driving a lot of flows into equities. With pension funds struggling to meet old age related payments, equity appears to be the only alternative.

Don’t forget the $6.50 trillion liquidity infusion by global central banks in just 4 months. That is also likely to substantially find its way into passive equity avenues like index funds and ETF assets. So, rich valuations could get a lot richer and individual P/E ratios may cease to matter. Don’t worry about the valuations for now. Unless there is a shock, Nifty is headed higher.