The markets made fresh lifetime highs this week, but have now got into a bearish mode. Reasons are many, both domestic and global, with politics playing pivotal role.The initial euphoria over the victory of BJP in assembly elections has come as a cropper of sorts, with the party not looking in a position to form a government in Delhi, while its victory in other states, except for Rajasthan, was largely factored in by the markets. Also, experts say that whether this 4-0 sweep would translate into a similar event in 2014 general elections looks not-so-sure."There was a lot of political hope that got built in over the last couple of days ... The market is now beginning to understand that the state assembly election results do not necessarily lead to a very similar outcome at the general election level," says Manishi Raychaudhuri, MD & HoR, BNP Paribas Securities.Most of it now depends on what opinion polls tell us of what is going to happen in general elections, say experts."It was expected that the markets would take the assembly polls outcome relatively positively. Global backdrop also looks relatively upbeat, with American macro numbers looking up and WTO accord in Bali being signed over the weekend. So, with the overall mood fairly pleasant for the global markets, it was expected that the domestic market would take it positively. A lot of will now depend on what the opinion polls show over the course of January, February, March vis-à-vis the general elections in May next year," says Saurabh Mukherjea, CEO-Institutional Equities, Ambit Capital.If there is positive sentiment post general elections, how far could Sensex rally? "In a scenario where we have tightening but the markets do not take it too badly, where we have an improvement in governance in the second half of 2014. In that sort of scenario Sensex at 25,000 is not out of question," Saurabh Mukherjea says.Some experts also believe that elections are a short-term trigger for the market, and really do not matter in the long run."I would not really look at the elections as a reason to stay invested or not to invest. As we have always been saying, elections really do not matter in the long run. What we need to look at is the underlying business conditions ... the outcome of elections does not really worry us so much as the economy. If you look at the last 30 years, Indian economy has grown at an average of around 6-6.5% and that is irrespective of the governments which we have had over these years," says IV Subramaniam, Director, Quantum AMC.The Sensex on Monday rallied as much as 487 points to hit lifetime intraday high of 21,483.74. The 30-stock index closed 329 points higher at 21,326, a record closing high.Besides politics, the major factor that is driving the market sentiment is flowing from the US.Just days back, the US again triggered a debate over its quantitative easing programme, with a top Fed official saying he is open to curtailing the $85-billion-a-month purchases this month itself.

The statement from Charles Evans, the president of the Federal Reserve Bank of Chicago, holds significance as he is an ardent supporter of the easy money.

The impact of QE tapering on emerging markets like India has been debated thread-bare, and a conclusion on how much it would effect is far from the round table.The tapering, even if were to happen starting now, would be in a phased manner, taking out $10-20 billion a month from the $85-billion initiative. Some experts say this would not have much impact, while others feel otherwise.The reason the US may go for an earlier-than-expected tapering is economic data. The economy of the US grew at 3.6 per cent in the third quarter. A welcome news no doubt, but this triggers fresh concerns over a tapering in December itself, reason enough for the Indian markets to get nervous.Talking about domestic economic story, the CAD figures have come as a big relief for the market. The current account deficit slipped to $5.2 billion in September quarter from $21 billion deficit in the year-ago period. This makes it 1.25% of the GDP. The same was 4.9% in the preceding quarter and 5% in the year earlier. The narrowing of CAD is primarily due to a significant fall in gold imports.CAD was a big factor weighing on investor sentiment and also on the value of the rupee. Finance Minister P Chidambaram recently said that CAD for the year will be less than $60 billion, or 3% of GDP. The latest data suggests the government may achieve this target.India's GDP growth rate figure for the second quarter was better than expected at 4.8%. In fact, manufacturing expanded for the first time in four months for November.In all, domestic economic data looks okay, and the only two concerns for the markets seem to be general elections and QE tapering.QE tapering will happen sooner or later is almost a given, with some experts taking a contra call, suggesting the US may in fact pour in more liquidity.At worst, the US is expected to go for a phased tapering, something which experts say has been factored in by the markets.With a majority of experts of the view that the Sensex may hit 24,000, some putting the figure at 25,000; it seems it's over to politics from here.