After getting stuck in a range for most part of this calendar, Indian stock

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markets showed signs of breaking out into a bull phase with benchmark equity indices hitting its highest close since January 2008, mostly on rampant buying by foreign investors.

NSE’s Nifty index broke the 5,500 points barrier, closing at 5,540 points with a gain of 61 points – the highest close since January 18, 2008. BSE’s 30-share Sensex closed at 18,455 points – its highest level since February 5, 2008.

Sensex gained 406 poi­nts in last two trading sessions to hit a 30-month hi­gh, with the BSE’s market cap rising by Rs 1,03,737 crore in last two sessions.

However, the gains in BSE mid-cap (0.91 per cent) and BSE small-cap indices (0.79 per cent) trailed the gains in Sensex (1.08 per cent).

NSE’s India VIX index, or volatility index, stood at 16.53, indicating a higher probability of market moving further up.

FIIs were net buyers of equities worth Rs 821.18 crore. They have bought a net of Rs 7,308 crore ($1.575 billion) so far this month, according to Sebi data. This calendar, FIIs were net buyers of Rs 55,003 crore ($12 billion).

Domestic institutional investors, who have been booking profit in recent past, were net buyers of equities worth Rs 215 crore on Thursday.

“Main driver of the market is higher liquidity, also the monsoon has been good, though corporate earnings are not very high. At the same time, there were not too many disappointments,” Dinesh Thakkar, managing director, Angel Broking, said.

The recent success of public issues such as Engineers India, SKS Microfinance and Bajaj Corp, which gave decent returns to investors, also added to the positive sentiment on Dalal Street.

Banking and FMCG sector stock were in demand. Bankex index gained 1.92 per cent, showing maximum gains. The banking index has gained 10.53 per cent during the last one month against a rise of 2.94 per cent in the BSE benchmark index. Major gainers among the listed banks were ICICI Bank (4.38 per cent), Union Bank (5.15 per cent), Yes Bank (4.59 per cent), Canara Bank (1.79 per cent), Bank of India (1.02 per cent).

Among the FMCG stocks, the major gainers were ITC (1.54 per cent), Nestle (1.94 per cent), United Spirits (2.04 per cent), Ruchi Soya (8.27 per cent).

“Prime reason is foreign institutional investors’ participation. We have seen good inflows consistently. There is a scarcity factor also working with FIIs’ buying select scrips which has led to a hike in their prices,” Sanjeev Patni, president & head institutional equities, Prabhudas Lilladher, said.

“Liquidity is driving the market. There is rampant buying from FIIs. The market is not cheap but it is not very expensive either,” said Ajay Parmar, head research, institutional equities at Emkay Global Financial Services.