Bernstein identifies three risks to India's market rally

Bernstein is also skeptical about the extent of interest rate cuts in the near term. "The kind of rate cut environment that the markets are already pricing in, Indian market is pricing in 6.3% on 10-year bond yields. I don't foresee that happening in the near term. So, that to me also remains one key risk," she said.

Agarwal noted that while domestic flows are strong and supporting the market, but for foreign money to come back meaningfully, Indian markets need to see valuations coming down.

At current levels, she sees more potential in larger quality names.

“Those would be the kind of pockets to look for opportunities right now. It is not that there are no opportunities but they are limited,” she said.

According to her, most public sector undertaking (PSU) banks don’t look attractive. “Private banks are not in our buy list right now but they are not in our sell list as well. So I am okay adding more on the private banks,” she noted.

Agarwal expects a tactical rebound in China markets with a lot of policy measures helping improve investor sentiment. “Directionally we are expecting the markets to continue to be more on that upward trajectory from here,” she explained.

Mark Matthews from Bank Julius Baer & Co, had also expressed a similar opinion in an interview with CNBC-TV18 earlier this week. He said the Chinese market might be at its lowest point. “I sense that it's bottoming, and the next step could be quite a sizable rally,” he said.