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In some areas, valuations seem stretched, as seen in the surge of micro-cap stocks and the enthusiasm for new issues, including in the SME sector, Jaykrishna Gandhi, Head of Business Development, Institutional Equities at Emkay Global Financial Services, said on Wednesday.

The Nifty trailing PE stands at 23.4x, indicating a balance between not being overly expensive and not particularly cheap, especially considering the forecast 12-14 per cent earnings CAGR over the next two years, he said.

The Indian stock market ended 2023 close to its highest levels ever. As the New Year begins, there's been some nervousness, with a slight correction of 1-2 per cent from Monday's peak.

On Wednesday, Sensex slipped 536 Points to 71,356.6, while Nifty was down 148 points at 21,517.35.

This week, various macroeconomic data from both India and globally will likely keep the markets volatile. A key event to watch out for is the release of the US Federal Reserve's minutes, which may hint at the timing of potential rate cuts.

This week, the energy and metals sectors have been prominent in market news, but no specific sector has significantly outperformed the overall market.

Looking ahead, increased volatility might become more common as the election season nears. However, factors like stable inflation and strong credit/GDP growth are positive signs for the market's health, Gandhi said.