"Looking at the weekly chart for the India Sensex, I note that the recent upward break has been on very low volume (in fact, volume over the last year or so has generally been low compared with 2008 levels). You never talk much about volume when you interpret the charts, but I'd like to know if you think it is relevant in this case (i.e. what does the low volume say about the strength / sustainability of the price action?). I'm interested because I want to establish a position in Indian equities, but am not convinced that now is the right time, especially given the relatively high valuation based on PE. Your service has certainly got me thinking more! - Thanks."

Eoin Treacy's view Thank you for this interesting question. I rarely look at volume data on indices because it is too easy to fudge, often unreliable and exchanges will occasionally change the way they measure trades so that it makes a mockery of volume charts. I'm afraid I do not know why volume has trailed off so markedly over the last few years. Looking at this 10-year chart it is now at levels that predominated before 2005. I wonder if it has anything to do with currency controls introduced in 2007 but would welcome some clarity from subscribers if they can shed some light on this issue.

As you will see from the above report India is one of the more expensive markets both regionally and globally on a P/E basis. However as David has pointed out, not least in the Subscriber's Audio, it might be more instructive to compare the impact high P/Es have had on the stock market's performance historically.

This overlay chart of the Sensex Index with its P/E indicates that major stock market peaks have coincided with P/Es above 22. I have doubts about whether the plunge in P/Es in March is reliable but at today's level while the market is trading rich, it is not in what one might categorise as danger territory from the perspective of P/Es.

As you know we will always rely most heavily on the price action. The Sensex rallied impressively from the 19,000 area and has slowed down somewhat as it approaches the 2008 peak near 21,000. I sold my long position on the first small pullback and would welcome a reaction which might offer a chance to get back in at a more favourable level. I rate the potential that we might see such an eventuality at 50/50 because on the one hand the market is a bit overextended in the short-term term but it has done nothing to indicate a surplus of supply above the market and other Asian indices are breaking to new highs.