March 14, 2017 saw NSE Nifty cross 9,100 mark for the first time in its history. Although the markets are buoyed by the massive victory in Uttar Pradesh elections by Prime Minister Narendra Modi-led BJP, the momentum is unlikely to hold only on this event. 

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This was not the first time markets have cheered Modi's victory. In 2014, when Prime Minister Narendra Modi had took charge, indices had turned bullish and touched fresh highs. 

In November 2016, PM Modi announced ban on Rs 1000 and Rs 500 notes with immediate effect made markets turn bearish. 

Analysts estimated that markets will take their own sweet time to recover. 

Now, with Sensex touching its two-year high and Nifty crossing 9100-mark, are these sustainable? 

Analysis suggests that Indian markets are already the most overvalued when compared against their Asian peers. 

Moreover, events like the US Federal Reserve rate hike are more likely to weigh heavy on Indian stocks. 

Next 36 hours will be very crucial for the domestic as well as global markets because the  outcome of policy meetings at the US Federal Reserve, the Bank of England and the Bank of Japan coupled with a Dutch election vote all due.

According to a HDFC Securities report, there is an 86% chance of a Fed hike -- according to the Fedtool that the markets look at. 

As far as Indian markets are concerned, the investors are pricing in a near 100 chance of a rate hike. The markets fear that a rate hike in the US will mean outflows from the Indian markets are misplaced. 

There is no hot money that will leave India. It has already left. The Foreign Institutional Investor (FIIs) have sold Rs 32,000 crore in October-­Jan and bought Rs 10,000 crore in February, HDFC Securities said. 

Commenting on Nifty's performance and outlook, Amit Goenka, Analysts at Multibaggerstocks.co.in, told Zeebiz, "One of the biggest threats to the current  bull run is rate hike by the US Fed. Markets will react to the rate hike on Thursday morning. If the Nifty still manages to sustain at current levels till Friday closing, then we expect further upside." 

"With the current mandate, FIIs will definitely not want to cut their exposure, hence the rate hike should not have a substantial effect on the markets. However, if the total number of rate hikes as previously suggested by the Fed, is increased from three to four this year, then that could dent the markets."

FIIs sentiments can be witnessed in today's trade as well. Markets are trading flat to negative as in anticipation of the US Fed's move. 

Anand James, Chief Market Strategist, Geojit Financial Services, said, "It would be a surprise if Fed continues to keep its finger on the pause button. In such a scenario, markets would be worried that the three rate hikes that were scheduled this year, would  happen in quick succession." 

"Such an event could put pressure on dollar denominated debt and FII inflows. Clearer electoral mandate to push reform measures eases that pressure a bit, and of late we have also seen that Domestic institutional buying has more or less negated recent FII selling," James added.