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It is worth noting that currently, nearly 60% of the Nifty 500 constituents are trading at valuations above their 10-year average, with a forward P/E ratio of 21.92x—well above the long term average of 19.6x. This reflects a relatively high market valuation and optimistic expectations for future earnings growth.

While domestic macroeconomic data remains strong and liquidity is ample, elevated valuations increase market sensitivity to earnings delivery. If corporate earnings fall short of expectations, or if global economic volatility triggers continued foreign capital outflows, a short-term valuation correction may occur. The rupee hitting a new low of 88.44 against the dollar highlights persistent external pressures, which may affect the pace of FPI inflows.