CNBC's Inside India newsletter: Stocks had a record-breaking rally. What's next?

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After a record-breaking 14-day rally, analyst fear risks are rising from the stock market’s own success.

This report is from this week's CNBC's"Inside India" newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribeEquities also set six all-time highs within that period.has been on the march throughout the year. There have been 44 record highs set in this year's 169 trading sessions, according to CNBC's count.

"As signaled by other macro indicators, like low inflation, a small current account deficit, and rapidly consolidating fiscal balances, there is rising slack in the economy," said BofA's India economist Rahul Bajoria."This is further corroborated by evidence of faltering consumer and business confidence, albeit persistent asset price inflation."

Domestic politics also pose a risk. If the government redirects spending toward welfare from capital expenditure — a potential shift since Prime Minister Narendra Modi's party lost its majority in the general election — it risks reigniting inflationary forces while adding downward pressure on companies' earnings that would have benefited from infrastructure spend.

Indian stocks now have the largest weighting in the MSCI Emerging Markets Investable Market Index with 22.14%, overtaking the 21.5% allocation toward China. Desai points to China's history when, in 2008, it became the largest weighting in the index. Chinese stocks then underperformed the broader emerging market index for the next four years.

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