There are times in financial-market rallies where the gains become so spectacular and the euphoria reaches such a pitch that it becomes easy to forget about the risks.

India, it could be argued, is going through such a moment.

The benchmark stock index is at a record high, having gained 43 percent in the past 12 months; the rupee is Asia’s best performer this year; and the nation is poised to become the world’s fastest-growing major economy in 2016.

But there are risks, of course. There always are. Here’s a look at five of the biggest of them -- events ranging from a faster-than-anticipated surge in U.S. interest rates to renewed religious tension in India. All of them are capable of halting, or at least slowing, the market rally.

David Fuller's view

When you really like a market, it is also worthwhile considering what could go wrong, if only to keep one’s feet on the ground.  I had not appreciated one of the five factors listed in this article.  Additionally, there is another one which concerns me and it is not mentioned in the article. 

If you already have or are considering an investment in India, I would certainly read the entire article.  I had overlooked the “Remittances Fall” item, basically about India’s migrant labourers working in oil-producing countries.  Some will inevitably lose their jobs with prices at today’s levels.  The article points out that India probably received about “$71 billion in remittances in 2014, the highest among 143 countries tracked by the World Bank”.  The loss of some of these remittances is currently a high probability risk, in my opinion.

What the article does not mention is the monsoon, on which India is very dependent.  Last year India had a delayed and somewhat weak monsoon, which affected agricultural production and pushed up the inflation rate.  India will remain very dependent on its monsoon, although infrastructure development and modernisation of its farming would certainly help.