It's always difficult to time the markets, though opportunities and reasonably priced stocks often emerge even with the index at 38,000 levels.

The rally in stocks maybe a little overdone, especially the large cap stocks. Small and midcap stocks are still significantly lower, when compared to Jan levels and could see some value even now.

Now, a few large cap stocks have become very pricey, while the Sensex trailing p/e at 24.5 times, is very expensive. The problem for the markets is the fact that the index has run on a few stocks and if these fall, the indices will fall and drag other stocks lower as well.

Leave alone economic and political data that is likely to emerge in the next few months - but, purely going by a likely one year forward p/e of 21 times for the Sensex, the markets are expensive. This is much higher than the historical average of 17 times in the past.

So, if you are buying into stocks, you need to be very careful. In fact, if you have made decent money, there is little harm in partially booking profits.

Having said that the one thing we must point is that liquidity is driving this market, because the macros are not really great. The monthly SIPs of almost Rs 7000-8000 crores, has given solid liquidity support to the markets.

Fundamentals though are not impressive, given the falling rupee, rising crude oil prices and elevated inflation levels.

The one other development of the last few quarters is that interest rates have been rising. It is now possible to get interest rates of around 8 to 8.75 per cent in good quality corporate FDs with yields touching near 10 per cent, which is not bad. This may result in some shift in money from stocks to fixed instrument bearing investments. In any case, there are tax liabilities in both.

Election results to remain crucial

Election results in states like Madhya Pradesh and Rajasthan will remain crucial in the next few months, while central government elections are not too far away.

So, if you are investing in stocks with the next one year in mind, be prepared for volatility. Nobody is sure of the outcome of the National elections in 2019, where things look lot more uncertain than they were a year back.

So, it maybe a good idea to remain partially invested in shares, while booking profits at higher levels. It is always good to prevent capital erosion, even if it means notional.