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 The clear dovish message from the US Federal Reserve has set the stage for a smart Santa Claus rally in the coming days, and this can even trigger a pre-election rally that can take the markets to a series of new highs, says V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The takeaway from the Fed's message on Wednesday is that the tightening cycle is over and three rate cuts are possible in 2024. The market expects four. The record breaking rally in the Dow will send many indices to new records, he added.

The crash in the US 10-year yield to 4 per cent will trigger large capital flows to India. The main beneficiaries will be the large caps, particularly the fairly valued large caps in banking. IT too is likely to attract buying.

Retail exuberance can lift the mid and small caps, too; but there is no valuation comfort in this segment, he said.

Triggering a massive rally by the US Fed message, BSE Sensex is up 847 points at 70,431 points on Thursday.

IT stocks are leading the rally with Infosys and HCL Tech up by more than 3 per cent.