Benchmark indices on Monday closed at record highs led by auto stocks and heavyweights such as Reliance Industries as another rally builds ahead of the earnings season that kicks off later this week.

At Dalal Street, the 30-share Sensex rose 494.28 points, or 0.67 per cent, to end at 74742.50, while the Nifty climbed 152.60 points, or 0.68 per cent, to settle at 22666.30.

Market circles attributed the record show to strong flows from domestic institutions: provisional data from the NSE showed them making net purchases of Rs 3,471 crore. However, foreign portfolio investors (FPIs) were net sellers to the tune of Rs 685 crore.

Analysts said the market is keeping rich valuations by the wayside and is banking
on robust corporate earnings accompanied by encouraging management commentary
when the results season begins with Tata Consultancy Services.

Besides, there is optimism around the return of Narendra Modi as PM for the third term thereby bringing continuity in policy and the next set of reforms.

“Despite expensive valuations, investors are willing to bet big on Indian stocks on expectations of a strong growth momentum going ahead, which would augur well for equity markets,” Prashanth Tapse, senior VP (research) at Mehta Equities Ltd, said.

“After a stellar 2023-24, Indian equity markets continue to march higher into new territory. Hopes of a favourable outcome from the ensuing general elections and the subsequent policy thrust are keeping sentiments upbeat. The broader market is slow in catching up and investors will do well to be cautious in entering small/midcaps without adequate due diligence,’’ Dhiraj Relli, MD & CEO at HDFC Securities, said.

Ajay Menon, MD & CEO, Broking & Distribution, Motilal Oswal Financial Services said India is at the confluence of the best macro and micro tailwinds, such as moderating inflation, range-bound crude prices, easing of 10-year G-sec yield, stable currency and resilient corporate earnings.

The rupee on Monday ended marginally weak at 83.32 against the dollar amid the global strength of the greenback.

“We expect the rupee to trade with a slight positive bias on the rise in risk appetite in global markets on reports that Israel has withdrawn its soldiers from southern Gaza. FII inflows and strength in the domestic markets may also support the rupee,” said Anuj Choudhary, research analyst, Sharekhan by BNP Paribas.