Sensex rally won’t last

Indian equities scaled new highs this week, with the Sensex surpassing 39,000 for the first time on Tuesday. But we doubt that the recent rally will be sustained. From a valuations perspective, Indian equities are now looking extremely stretched. More important, we think that a sharp slowdown in economic growth in the US will cause the S&P 500 to slump and investors to retreat from risky assets generally later this year.