Mumbai: Indian stock markets, fuelled by strong foreign investor interest, rose to a new record on Wednesday, with domestic analysts warning that stocks were getting inordinately expensive.

The Bombay Stock Exchange’s benchmark 30-share Sensitive Index, or Sensex, topped 17,000 points in intraday trades for the first time, recording the fastest-ever 1,000-point rally on the bourse.

Index Watch: Brokers celebrate as Sensex breaches the 17000 mark

The rally came in just five trading sessions after the index hit the 16,000 mark last Wednesday.

The 1,000-point jump rally was largely led by a single investor class, the foreign institutional investors (FIIs), who bought Indian shares worth Rs7,873 crore in the past five trading sessions since the US Federal Reserve’s 0.5% cut in interest rates.

The domestic mutual funds, the second largest investor group in India, however, missed this rally, with most of these firms ending net sellers during this period.

After touching the 17,000 milestone in the morning session, the Sensex lost about 140 from its day’s high of 17,073.87 to end with minimal gains at 16,932.36, up 0.3% from 16,899.54.

The 50-stock Nifty index of the National Stock Exchange (NSE) that was just 20 shy of the 5,000 mark at its day’s high of 4,980.6, ended almost flat at 4,942.75.

Nifty was the highest gainer among all major equity market indices across Asia-Pacific since the rate cut in the US last Tuesday. It gained 4.4%, while Taiex, the Taiwanese benchmark index, Sensex and the Hang Seng, the representative index of Hong Kong, followed with little above 3.5% gains. The Shanghai Composite, the benchmark Chinese index, was the sole loser among all major Asian markets. It went down 1.05% since the Fed rate cut.

The appetite for Indian stocks among the global institutional investors has increased even more in the recent period as India is now largely seen as a safe destination for equity investments, said Ibukun Adebayo, who represents the London Stock Exchange in India. “There is an increasing perception among foreign investors that India is safer than other fast growing economies as the growth here is more sustainable in nature. However, there is lot of risk in this belief," said Adebayo.

An analyst cautioned at the speed of the market climb and high prices. “There is no doubting that the market is expensive at current levels. But with the increasing liquidity, it may sustain at this level," said Lalit Thakkar, director of research at Mumbai’s Angel Broking. “The price-earnings (P-E) multiples for the financial year 2008 is at about 18.5. I think one can keep his money invested till it hits 19 times the FY08 earnings."

The fastest 1,000-point rally of the Sensex before the current surge was reported in March 1992, when it moved from 3,000 to 4,000 in just 14 days.

While the index climbed a third then, it took a 6.3% gain to climb to 17,000 from 16,000. Last year saw the Sensex breach five new 1,000-point milestones.

The slowest 1,000-point gain of the Sensex was during the seven years between 1992 and 1999, when the index crawled from 4,000 to 5,000.

Also, during the 2000-2005 period, the index climbed from 6,000 to 7,000.