The economy may be under pressure but the Sensex continues to make new highs and get closer to 42,000 levels. If you are wondering about the possible macro factors driving the market, then here it is.

Firstly, economic reforms on right track. Markets are convinced that the growth slowdown is purely temporary. Reforms like GST, IBC etc are on track despite the teething problems faced along the way. IBC has helped banks to recover Rs.1.60 trillion and GST has been put through without impacting inflation. The intent is certainly in the right track.

Secondly, there is the lag effect of major fiscal measures taken. The government initiated a slew of fiscal reforms in the last few months. The cut in corporate taxes to 22%, the 15% concessional tax for manufacturing and the personal tax benefits are all likely to have a positive effect. In addition, the big thrust on infrastructure and rural spending will have a salutary impact on growth in the coming months.