Take a look at some of the global markets in the last one month, since Jan 25, 2019.

The Shanghai Composite is up a staggering 11 per cent in the last one month, while the BSE Sensex is down 2 per cent. The Hang Sang is up 6.5 per cent, the German DAX up 3 per cent, the US Dow Jones (up 6 per cent), the Korean Kopsi (up 4 per cent), Brazilian Bovespa (up 1 per cent), the Singapore Strait Times (up 2.1 per cent) etc.

In fact, if you mine data of most developed and emerging market, you cannot find any market that has really dropped in the last one month, except the Indian market.

Why are Indian markets falling?

There are a number of reasons for India's under performance. Markets are now getting increasingly worried that there maybe a non NDA government at the centre. Until 6 months to a year back, there was almost a unanimous view that the NDA government would return to power. While it is always difficult to hazard a guess, one is not so sure these days.

The only support for the market right now comes from mutual funds. If the fund inflows into equities through mutual fund starts slowing, we might see markets falling.

In the last few weeks, we have also seen crude oil prices rising and geo political tensions rising, after the Pulwama attack.

Valuations a concern

India stocks trade at very rich multiples, at least according to the index multiples. The MSCI India is 50% higher than the P-E of the MSCI EM Index.

Critics may argues that at the broader levels, the markets are actually cheap. There is merit in that argument. We have seen small and midcap stocks crash, which have made their valuations exceedingly cheap.

However, corporate earnings of the index companies, including banks need to grow faster, to justify such high price to earnings multiple. In the meantime, most global markets have rallied, on hopes that the US and China would ink a trade deal.

Should you buy into the markets now?

It clearly depends on the election outcome that you predict. It is likely that the NDA will drop a large number of seats and the problem it has is that it does not have too many allies. It is always so difficult to hazard a guess, but, it looks that the coalition era maybe back. The problem right now is that though the markets look overvalued when compared to global markets, that is not the whole truth. It looks overvalued only because a select few stocks have gone up, while the broader markets are languishing. If you see value in certain pockets, it might make sense to buy into these stocks and hold the same for the long term.