and the earnings outlook for non-export blue chips remains poor, analysts say.
India's biggest power equipment maker, Bharat Heavy Electricals Ltd (BHEL), is down 25 percent this year after hitting its lowest levels in about eight years.
State Bank of India (SBI), partly owned by the government, has dropped more than a fifth as lending demand cooled. In November, it reported its steepest quarterly profit fall in more than two years.
"A new economic cycle is starting, but nobody has the courage to buy meaningfully into economically sensitive sectors like capital goods, construction, realty, or public sector banks," said Samir Arora, a fund manager at Helios Capital Management in Singapore.
Many potential buyers are pinning their hopes on a victory by the opposition Bharatiya Janata Party, widely seen in markets as being more business friendly, in general elections due by May.
A key indicator of its strength comes on Sunday when India will post results for a handful of state elections.
Still, national elections are months away, and could yield a divided mandate and a weak coalition government, the result investors fear most.
With such uncertainty, domestic investors find it hard to buy into the rally.
"A structural bull market cannot be there in an environment which is so challenging," said IDBI's Srivastava.
"Structural bull markets need earnings and macro-economic support. So if markets go higher it will be an unsustainable high, if expectations are not fulfilled accordingly."