Mumbai: The benchmark BSE Sensex climbed for the fifth straight session on Thursday to breach the 37,000-mark, on expectation that earnings growth of Indian companies will accelerate.

The Sensex and the NSE’s Nifty 50 indexes ended the day at record closing highs, although the currently rally has been driven by a handful of stocks.

In intraday trading, the Sensex rose 203.39 points, or 0.55%, to a record of 37,061.62, while the Nifty 50 advanced as much as 0.48% to an all-time high of 11,185.85 points.

The Sensex closed 0.34% higher at a record 36,984.64 points, while the Nifty climbed 0.32% to a record close of 11,167.30.

The fact that the rally was led by a few top stocks bothered investors. “It is a rally led by very few mega caps. It is an extremely narrow rally," said Ajay Bodke, chief executive and chief portfolio manager at brokerage Prabhudas Lilladher Pvt. Ltd. “The health of the market should be gauged from how the broader market is performing. If we look at the BSE mid-cap and small-cap index, separately, the other indices are sharply down from their record highs."

The BSE mid-cap index and small-cap index are down 13.96% and 19.21%, respectively, from the record highs on 9 January and 15 January.

“Essentially, this is not a healthy development from a long-term perspective," Bodke said. “The top stocks are getting too expensive and may not be able to help sustain the rally for the index. At some point, value migration will come into play." He added that earnings growth is the only hope, especially when the macroeconomic situation is not promising.

Early corporate results indicate a revival in consumption and business sentiment, as the economy settles down after the implementation of the goods and services tax.

An analysis of 102 listed companies showed that aggregate profit, after adjusting for one-time gains and losses, rose 14.3% in April-June, the highest in nine quarters.

A section of investors expects the rally to sustain. “With earnings improving, people now have a confirmation that recovery is underway, and that has attracted investors," said Deven Choksey, group managing director, K.R. Choksey Investment Managers Pvt. Ltd. “The rally is here to stay. That said, small intermittent corrections aren’t ruled out."

During Thursday’s trading, gainers beat losers in the 1.1:1 ratio. The BSE Power index and BSE Utilities index gained the most, rising 1.44% and 1.66%, respectively.

Shares of Maruti Suzuki India Ltd dropped 3.7% after reporting a 26.9% rise in profit in the June quarter from a year earlier, missing analysts’ estimates.

Private lender Yes Bank’s stock fell 3.6% despite meeting quarterly profit estimates, as investors were concerned about rising gross slippages.

For the Sensex, stocks of financials led the gains. Top lender SBI rose 5.6%, while ICICI Bank Ltd gained 4.1%.

Foreign institutional investors have sold nearly $919.10 million worth of equities since January. Domestic institutional investors have infused a net 68,771 crore into equities.

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