The BSE Sensex hit an all-time high on Friday on the back of strong foreign buying, marking a remarkable turnaround from two months earlier when the rupee fell to record lows and threatened a crisis of confidence.
The stock index today surged to an all-time high today just after the opening bell, smashing its earlier record of 21,206 which was set in January 2008.
After breaking its 2008 record, the Sensex kept going up, setting a new all-time high record of 21,293.88, up nearly 130 points. At its day's high, Nifty hit 6,332.60, nearly 25 points away from its record high of 6,357.10.
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After setting a new peak, the Sensex gave up most of its gains as the session progressed. The Sensex ended 32 points higher at 21,178.35, also a new record closing high. The Nifty gained 8 points to close at 6,307.
Sustained inflows from foreign investors have been the biggest driver for the Sensex, which gained over 9 percent in the past month. Overseas investors have pumped in close to Rs 18,000 crore in the past 20 sessions.
The markets seem to have welcomed the RBI and the government's measures to stabilize the rupee and boost the economic growth, Finance Minister P. Chidambaram said at a press meet.
The finance minister however cautioned investors against excessive exuberance over market rally.
Despite the Sensex hitting a new high, the broader market has not participated in the rally. Nearly, three-fourth of all listed stocks on BSE are least 50 per cent away from their respective highs.
UR Bhat, MD of Dalton Capital, said, "Investors have to be very careful at these levels as the current rally has not been built on strong foundations."
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"Foreign fund inflows into select stocks have pushed up the Indian markets, which have not seen broad participation from investor community. Any reversal of fund flows could hit Indian markets hard. We are closer to US tapering than ever," he added.
(Also read: Top five Sensex gainers since January 2008)
Raamdeo Agrawal, director of Motilal Oswal Financial Services, said right now the rally is confined to large caps. "If the new highs bring in more participants, the broader market could also see a rally," he said.
The gains represent a remarkable comeback for the Sensex, which has advanced nearly 22 per cent since hitting an intraday yearly low of 17,448.71 points on August 28, when the rupee had hit a record low of 68.80 to a dollar.
The delay in the US Federal Reserve's tapering of its monetary stimulus, a sharp recovery in the rupee and signs showing the economy may have bottomed have contributed to the recent rally, analysts said.
Stocks in action
State-owned banks gained for a second consecutive session on Friday on hopes of stabilising asset quality, sending State Bank of India Ltd up over 4 percent. Among other PSU banking stocks, PNB and Bank of Baroda rose over 4 percent each. IDFC was the highest gainer among Nifty stocks rising over 6 percent.
The Sensex journey: From 2008 to 2013
The Sensex hit the 21,000 mark for the first time on January 8, 2008. A couple of sessions later on January 10, the BSE benchmark of 30 shares hit a high of 21,206, a record that stayed until Friday.
So, basically markets today are at the same level as nearly six years back. In these six years, the Sensex has been through a roller-coaster ride.
Just months after hitting a record high on January 10, 2008, the Sensex slumped 64 per cent to a low of 7,697 by October 2008. The selloff coincided with the global financial crisis, which hit risk assets like stocks severely.
The Sensex came near the 2008 peak again in November 2010 tracking the recovery in the Indian economy. However, the gains could not be sustained, and by December 2011, the Sensex had eased to 15,000 levels, tracking the European debt crisis, which threatened to derail the world economy.
Since then, markets have witnessed a grinding journey as the Indian economy lost its growth momentum. The latest rally, starting September, has been driven by easy liquidity and a sharp pullback in the rupee.
(With inputs from Reuters)