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Bulls continue to march as Indian equities witnessed a strong rally with benchmark indices hitting fresh record highs in Friday’s early deals. Sensex hit a record high of 52,642 earlier in the day while the Nifty 50 index topped the 15,800-mark. Broader markets have also been seeing a strong buying action in the past few sessions led by rally in midcap and smallcap stocks.

Analysts expect the theme to continue and see various factors adding to the strength of the Indian equities, however, advise investors to exercise caution while picking stocks in the smallcap space.

Yes Securities expects Sensex to reach 60,000 by this year-end. Amar Ambani, Senior President and Head of Research – Institutional Equities, Yes Securities said, “The stock market is solely focused on the future. Hopes of a quick economic revival post unlock and expectation of large number of adult population vaccinated in 2021, are keeping markets excited. Q4 FY21 earnings have been encouraging, even after adjusting for the low base of March 2020.

He added on to saying that the broader market is very healthy. ‘’It is very likely that the top 10 heavyweights of the Sensex, which have been dormant for some time, will begin to participate. Already Reliance Industries (RIL) has resumed its up move after a six-month lull. This will add to the strength of Indian equities. Our target for Sensex is 60,000 by December 2021."

Sectors like IT and metal were supporting the indices as Nifty IT and Nifty Metal indices surged over 1% in Friday’s session. Heavyweights like TCS, Reliance Industries, Infosys, Coal India were lifting the Nifty higher on Friday.

Good monsoon, improving Covid situation & falling VIX should keep markets driving higher, Rahul Sharma - Head, Technical and Derivatives Research, JM Financial Services said. "Markets have moved from resilience to exuberance as Bulls continue to march towards mount 16,000 in Nifty with sector rotation & earnings keeping the momentum alive. Falling US Bond Yields along with supportive global cues ensure Nifty didn’t break key support levels.’’

V K Vijayakumar of Geojit Financial Services said that the exuberance in the mid and small-cap space is an area of concern. ‘’But markets can over-react proving the sceptics wrong in the short run. In 2017 the small index rose around 60%. The froth was removed in 2018 with big pain to the late entrants. Leading financial, IT, pharma and metals are on a strong wicket. Stay invested in these segments while exercising caution when investing in small-caps."

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