The concern in the market now is the excessive valuations in the mid and small-cap segments, says V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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Retail exuberance and sustained flows into the mid and small-cap mutual funds are driving this rally, which has slipped into a frothy zone. This broader market rally cannot continue for long, he said.

Safety is as important as returns. Undoubtedly safety is in large-caps now. Going forward, large-caps are likely to outperform mid and small-caps, he added.

The market signal is that Wednesday's sharp correction was a one day event and not a reversal of the uptrend. This confirms the success of the buy on dips strategy, which has played out consistently in the ongoing rally. The global cues continue to be favourable with the dollar index below 102 and the US 10-year bond yield hovering around 3.9 per cent, he said.

BSE Sensex is up 366 points at 71,231 points on Friday. Tata Motors and Tata Steel are up more than 2 per cent.

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