There is no better market than India currently according to S Naren, but there is a problem...

"India is in a fantastic place except that Indian valuations are completely different from the rest of the world. If you look at it, that valuation expansion is continuously happening," Naren said.

"But otherwise, if you look at it just from the point of view of outlook, I think there is nothing to say that there's any better country than India. All the other countries have serious challenges in one form or the other, whereas India doesn't have those challenges," he added.

The Nifty 50 has seen a strong upmove over the last month and has gained over 5,000 points from the 2023 lows of 16,828 that it fell to in March this year.

Naren attributes this rally solely to the domestic investors, saying that they have taken this market to where it is without any help from foreign investors. After selling equities to the tune of over $5 billion across September and October, the FIIs turned net buyers in November and have remained buyers in the first few days of December as well.

"Almost everyone we speak to says that foreign flows are yet to start. So, if they come in a big way, you can have a much bigger move and that will be more largecap-ish. But how much they will be is something which people can't predict because it depends on how the US economy shapes up, and how US interest rates shape up. And those kinds of factors will play a role in determining how much foreign flows will come," Naren said, adding that the top of this market will be determined by how much foreign flows come in during 2024.

The Nifty may have gained over 10% in 2023, but the broader markets have been bigger outperformers, with indices rising between 35% and 40% so far this year. Naren believes that investing in the broader markets now must be for the long term.

"I think, at an all-time high, all-time caution is required. And in the years of investing that I've seen, how do you practice more caution at the top - that's the toughest challenge," Naren said and added that this is not a top for the market yet.

India's primary markets have seen a flurry of IPOs recently, with most of them receiving a stellar response and listing at substantial premiums to their IPO price.

Naren also advises caution while investing in IPOs when the market is at an all-time high.

"That is our learning from the past. And, we always tell people, to look at simple indicators like price to earnings, price to book, dividend yield, return on equity. If you're able to identify these things more clearly in a stock, you are in a safer company. Otherwise, you have to do much deeper work on that company to decide whether to invest or not to invest," he said.