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NEW DELHI : Bull markets are born on pessimism, grown on scepticism, mature on optimism, and die on euphoria. - Sir John Marks TempletonAnalysts on Dalal Street have two views on whether the current record-smashing rally in domestic equities is in the second or third stage of a bull market.After rising 28 per cent in calendar 2017, domestic equity indices were unstoppable till Tuesday, and after a pause on Wednesday, they were again rising on Thursday.Since January 1, the S&P BSE Sensex has already added 540 points, or 1.6 per cent, till Wednesday’s close, while the broader Nifty50 added 188 points, or about 2 per cent.The rupee, too, has been on a high despite some intermittent dips. The domestic currency gained 6 per cent in CY17.But no one knows why equity and currency markets have remained nonchalant to the steady deterioration in the macro indicators?Last Friday, the government’s statistics office projected the nation’s GDP to grow as a rather lethargic pace, hitting a four-year low of 6.5 per cent. The Indian economy grew at 7.6 per cent last financial year, logging the fastest expansion globally.India’s fiscal deficit has already crossed the target set for 2017-18 by the end of November. Inflation is heading northward after remaining benign for several months.The bond market is the only space where the jitters are visible. There has been a spike in bond yields over the past few weeks in tandem with the deteriorating macro data.But, stocks and currency markets are singing a different tune.Indian markets may have discovered their own version of ‘conscious uncoupling’! says Sanjeev Prasad, Co-head and Managing Director at Kotak Institutional Equities.The continued strength of the Indian equity market despite higher bond yields, inflation and BoP suggests the market has either become over-confident about an earnings recovery and is simply willing to overlook these factors based on some misguided view about earnings and macroeconomic factors being irrelevant or less relevant for an equity market flooded with liquidity.Analysts reports over the past few months have repeatedly attributed the stock market’s dream run to an imminent earnings recovery, which they say can offset the weaker macroeconomic factors.Prasad says a strong currency and high valuations are ‘bad’ starting points for the equity market in CY2018.A de-rating of multiples and any sudden weakness in the rupee can hurt the performance of this market, he warned.