Mumbai: The Nifty retreated after breaching the 10,000 mark for the first time in opening trade. While investors continue to build hope on policy reforms, low interest rates and crude oil prices at comfortable levels, market analysts repeated warnings about stocks running ahead of fundamentals.

Here’s what analysts had to say about the rally:

Saurabh Mukherjea, CEO, Ambit Capital

The markets rally is driven by both domestic factors and global economic recovery. However, we are concerned about market valuations getting frothy and wary of investors buying at elevated levels. The markets are rising with no fundamental support. Earnings growth is not expected. We have set a long-term Sensex target of 31,000.

Mayuresh Joshi, vice-president and head of portfolio management services, Angel Broking

Liquidity is keeping the markets buoyant while better-than-expected earnings are supporting markets. The base for markets is higher now on hopes of earnings stabilization and oil price at a low level. The markets are reasonably valued but frothy in certain pockets like the small-cap space. The markets are likely to be re-rated post Q1 earnings.

Manish Sonthalia, head of equities, Motilal Oswal Asset Management’s portfolio management services

Markets are running ahead of fundamentals as only liquidity is driving the rally. Valuations are expensive and earnings are unlikely to see growth. High time markets should consolidate.

Ravi Gopalakrishnan, head of equities, Canara Robeco Mutual Fund

The markets are largely driven by liquidity, while structurally things are improving both at macro and corporate levels. Corporate earnings, which were benign in the last two-three years, are gradually picking up and may improve in the second half of the fiscal due to consumption boost by festivals and good monsoon. Earnings support will be crucial for the markets to continue the rally. The markets are expected to consolidate in the near term with no new domestic triggers and RBI’s (Reserve Bank of India) interest rate cuts is already factored in.

Gautam Shah, associate director and chief technical analyst, JM Financial Services

One should not get carried away in believing that this run-up would continue for good. For the first time this year, the market looks overbought technically and hence could shed some weight in the near term. We see signification resistance around the 10,000-10,100 mark and do not think the market is ready to get past this hurdle in the current attempt. Over the medium term, we see the Indian markets testing the 11,000 mark. The metals and auto sectors are likely to see continuing strength, while IT and pharma could end their long period of under-performance.

Arun Thukral, MD & CEO, Axis Securities

The markets are factoring in corporate earnings growth followed by good monsoon and enhanced transparency with the implementation of GST. The valuations are above mean, but we are still away from the frothy valuations seen in 2007-08. Domestic liquidity is contributing to the rise as the Indian investors have been increasingly participating in the equity markets directly and through mutual funds. Surplus global liquidity is also helping in maintaining the positive sentiments.

Sachin Shah, Fund (Portfolio) Manager, ‎Emkay Global Financial Services Ltd

The markets are likely to consolidate ahead. Good monsoon this year is also boosting sentiment. However, valuations are a bit stretched. Going forward, investors are likely to be cautious on stocks and will focus on management commentary post June quarter results.

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