Perhaps, the one and only one big reason why the Sensex and the Nifty have given such high returns is the fact that we have a solidly stable government under Prime Minister Narendra Modi. The second reason for the markets rallying thus far, is not only because of a stable government, but, because of PM Narendra Modi himself.
Foreign institutional investors have pumped in a staggering sum of $24 billion since the start of this year, primarily on the hopes that the government under Narendra Modi would unleash a wave of reforms. While expectations are high, the government has begun the process in right earnest. If the present trend continues, we could see some more gains come August 2015.
Of course, geo-political tensions remain the biggest worry for the markets at the moment. As we write tensions have escalated between Ukraine and Russia. The Iraq worries have not yet subsided completely.
The other worry for the market remains a rise in interest rates in the United States. There is a possibility that the US Federal Reserve would hike interest rates in the US. When that happens we could see a pause or even an outflow of FII money from emerging markets, including India. This may to some extent result in losses in the Indian stock markets. The chances of that happening by the end of the year are bright.
It's difficult to say where the markets could be headed by Independence Day of 2015. One would be inclined to bet on the markets trading higher by August 15 next year.