Even as equity market is scaling new heights, domestic brokerage Ambit Capital has a word of caution as it thinks that the stock market is in "overvalued" territory.

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According to the brokerage, there are five macro risks that could affect investor appetite for Indian stocks.

The risks include rising twin deficits, declining household savings to GDP ratio, the upcoming general elections and possibility of Indo-Pakistan hostilities over the next few years.

"Even as the Sensex's valuations clearly seem to be benefitting from record investor optimism, it is worth noting that with the exception of India's GDP growth, several macro variables are precariously poised," Ambit Capital said in a research note.

The report noted that GDP growth in this financial year will be a non-issue and is likely to surprise on the upside as an election-focused government pulls out all stops to gratify the voter and stimulate consumption growth.

Ambit estimates GDP growth at 7 per cent for 2018-19 as against 5.8 per cent in 2017-18.

Meanwhile, the report cautioned that "the stock market is in overvalued territory and is perhaps allocating an unduly low weightage to the increasing macro risks listed above".

The Sensex is currently trading at a 57 per cent premium to 9 emerging market's median P/E as compared to the 5-year average of 23 per cent, it added.

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At the end of today's trade, the Sensex was quoted at 38,896.63, up 202.52 points. The benchmark has gained 4,839.8 points so far this year.

"Given the rising risk of fiscal profligacy and the risk of financial saving inflows slowing, we urge investors to be cautious regarding their NBFC sector exposure," it noted.