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.
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