Nifty has been flattish in past six weeks as strong DII flows have more than neutralized FII flows. However historically, strong FII flows have been associated with markets making new highs, the report said.

India witnessed strong FII inflows along with other emerging markets from April23. It peaked out in June23 and it has now turned negative from Sept23. India is also heading for state and general elections over next 6-8 months which could increase political uncertainty and impact the FII inflows.

Nifty has been flattish in past 6 weeks and gave just 1.6 per cent return in past one quarter as strong DII flows neutralized FII outflows.

Market has been taking all headwinds in its stride and the action has been very stock specific as Mid/small caps continue to outperform large caps. Sectoral rotation is clearly visible as Realty, Metals, Power and Healthcare have joined the party.

Odds are evenly balanced as headwinds emanating from firm US interest rates, El Nino impact on crops and inflation, volatile crude and geopolitical uncertainty still abound, the report said.

Nifty is not in a bubble zone as it is trading at 17.2 per cent discount to 10-year average which provides comfort. India is on the verge of “Mother of all Elections” after having a stable government from past decade, however state election results will dictate market momentum in run upto Lok Sabha elections next year, it said.