The BSE Sensex and Nifty edged up on Monday, hitting a sixth consecutive record high and posting their best monthly gain since October, as strong foreign buying sparked a rally in blue-chips, especially those dependant on the domestic economy.
The Nifty 6.81 per cent gain in March was its best performance since a 9.8 per cent gain in October. For the quarter, the index rose 6.35 per cent, a second consecutive rise since its 9.9 per cent gain in the October-December period.
The record-setting rally has been sparked by heavy foreign buying - reaching a provisional $3.2 billion so far this month - as analysts cite expectations the opposition Bharatiya Janata Party would win elections set to conclude by mid-May, given its perception of having a more market-friendly stance.
Bets that India's economy will improve on the back of easing inflation have also played a key role. Interest-rate sensitive stocks such as banks and property developer DLF Ltd (DLF.NS) have been the top gainers this month.
The Reserve Bank of India is widely expected to hold interest rates on hold on Tuesday, pausing after tightening monetary policy by 75 bps since September.
"We will have to see whether the overseas fund flow will sustain. At this point in time, what we can say is markets should trade within a range and the undercurrent is positive," said Suresh Parmar, head, institutional equities at KJMC Capital Markets.
"The RBI policy is a non-event as it has already been discounted. Participants are waiting for the election outcome, which will have a major impact than tomorrow's policy announcement," he added.
The benchmark BSE Sensex ended 0.21 per cent higher at 22,386.27 points, after earlier hitting a record high at 22,467.21.
The broader Nifty gained 0.12 per cent to 6,704.20 points, after earlier hitting a record high of 6,730.05.
The NSE rose 18 per cent during the fiscal year ending on Monday, its second consecutive yearly gain.
Trading volumes were thin since bond and currency markets were closed for a local holiday.
Some banks extended gains even after posting a strong performance this month. State Bank of India rose 0.83 per cent on Monday, bringing its gain in March to 24 per cent.
Among lenders, Punjab National Bank was the best performer of the NSE this month with a 35 per cent rally. On Monday it lost 0.85 per cent.
Shares more closely tied to the domestic economy also outperformed this month, while exporters such as Tata Consultancy Services Ltd have fallen as a stronger rupee is seen denting earnings.
Cement maker ACC Ltd gained 2.73 per cent on Monday and 26.67 per cent for the month. Jaiprakash Associates surged 2.48 per cent on Monday and 28.2 per cent for the month.
Meanwhile, metals stocks rose on Monday, extending a rally this month on hopes a new government would ease new infrastructure projects and on easing concerns about China's economy. Hindalco Industries gained 8.29 per cent, bringing its gain for the month to 34.6 per cent.
However, capital goods companies saw some profit-taking. Larsen and Toubro lost 1.26 per cent after gaining 14.6 per cent till Friday and Bharat Heavy Electricals Ltd ended down 2.02 per cent. BHEL gained 16.9 per cent so far this month till Friday.