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Indian stock market benchmark Nifty50 today hit new highs when it touched 15,469 at day's high. The rally comes as a surprise to many as the second wave of the pandemic continues to batter the economy. The Nifty50 index has rallied over 60% in the past one year, outpacing every other major equity benchmark worldwide. according to Bloomberg .

Manish Jain, fund manager at Ambit Asset Management, however believes that the rally in quality "Good & Clean stocks" has just started and with a Vshaped recovery still in the offing and prospects of a double digit growth still look bright for FY22.

“Equity markets, unlike investors, are always forward looking. One of the key reasons why the indices have not corrected despite the second wave is that financial and human impact needs to be differentiated between. Unlike the first wave, the state governments have been smart about the lockdown and in that respect logistics and production has not completely broken down. Hence, the overall economic impact on the economy and growth is going to be limited," he said.

"Given the limited impact on overall economy and growth, we do believe that this rally in quality stocks in equity markets is here to stay. Overall shift will happen from Medium and Small enterprises to market leaders and hence even more of a reason to invest in quality names and market leaders. We do believe that financials, consumer discretionary names and chemicals are some of the sectors that should do well in the short to medium term," he added.

Naveen Kulkarni, Chief Investment Officer, Axis Securities, says Indian markets are cheering the downward trajectory of the Covid-19 curve as the recovery rate since the last few days has been faster compared to the new cases.

India today reported 186,364 new coronavirus infections during the previous 24 hours, for its lowest daily rise since April 14, while deaths rose by 3,660.

"With the improvement in the Covid-19 curve, India is playing catch-up with the global market, with broader market outperformance seen during the month, in which smaller companies have outperformed the large caps. If the government is able to arrest Covid 2.0 spread completely in the next 15-30 days, then the unlock trade will play in the market and the current rally will sustain," he said.

He however cautions that any delay in unlocking the economy beyond June will be a key risk in the near term.

In the near term, "we could see some profit booking, as today's market has crossed its previous high, but the long term structural story is intact for the Indian market. Broader market looks attractive at the current level and the sector rotation will play a crucial role to generate alpha in the near term," he added.

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