Global cues have turned distinctly negative with a sharp 3.64% cut in Nasdaq, which is the worst cut in 2024. The tech stocks which have been driving the rally in the US are facing the brunt of selling due to worse-than-expected results and news. In India, too, the sentiments have turned a bit negative on the Budget proposals to raise the capital gains tax. More importantly, there are signs of deceleration in corporate earnings after the impressive 24% growth in Nifty earnings in FY24. The excessive valuations in certain segments in the broader market are unlikely to sustain despite the irrational exuberance of retail investors. The disconnect between earnings and market prices in the broader market has been driven by the sustained fund flows into these segments and irrationally enthusiastic retail buying. Market history tells us that irrational exuberance can last longer than seasoned experts think. But it is always better to err on the side of caution.