Mumbai: The market capitalization of BSE-listed companies scaled a record high, with the BSE 500 index, mid-cap and small-cap indices touching a record high on Tuesday, fuelled by robust liquidity in the system.

The market cap of BSE-listed companies hit a new high of ₹ 110.7 trillion.

Earlier in the day, the BSE 500 index climbed as much as 1.65% to an all-time high of 11,817.82 points.

The BSE mid-cap index rose as much as 0.91% to a record high of 13,182.74 points, while the BSE small-cap index traded as much as 1.11% higher to a new high of 12,637.08 points.

BSE’s 30-share Sensex closed 1.58%, or 440.35 points, higher at 28,343.01, its highest close since 23 July 2015, while the National Stock Exchange’s 50-share Nifty index climbed 1.59% to 8,744.35 points, its best close since 15 April 2015.

While strong inflows into mutual funds supported the demand for small- and mid-cap stocks, firm world equities also kept overall sentiment upbeat for the Indian markets.

Asian and European shares climbed on growing hopes the US Federal Reserve may delay hiking interest rates until after the presidential election in November.

Even as Federal Reserve chairperson Janet Yellen said the chances of a rate hike were stronger than before, it was not clear if the hike would come in as early as September or only in December.

Meanwhile, the markets seem to be taking cues from Janet Yellen’s bullish assessment of the economy last week, and placing their bets on improving global economic growth.

“Abundant liquidity continues to push global markets higher. India is a domestic-driven economy, which is going to do well. This explains why mid-cap and small-caps are getting interesting," said Andrew Holland, chief executive at Ambit Investment Advisors Pvt. Ltd.

Market participants thought the confusion from Federal Reserve was unwarranted, and more clarity was called for.

“The Fed has issued conflicting statements. Right after Yellen’s comments, one of the other Fed members seemed to contradict her. I think the Fed and other central bankers are confused and in a bind trying to drive interest rates, inflation and the economy," Mark Mobius, executive chairman at Templeton Emerging Markets Group, Franklin Templeton Investments, said in an email response.

“We are now in a situation where the markets hang on every hint from the central bankers and the result is higher volatility and uncertainty. The bottom line is what the central bankers say and what they do are two entirely different things," said Mobius

“Their actions are unpredictable and trying to guess their next move is a thankless task," said Mobius, adding that this means India and other markets need to watch the situation very carefully and be ready to act accordingly.

“The key, of course, are the private investors and their willingness to make investments that will create productivity and growth," added Mobius.

Others seem to agree.

“Fed statements are confusing to decipher. It is difficult to predict when does the rate hike come in. We need to wait for the jobs report," added Holland.

Mutual funds have pumped in a net of ₹ 10,118.40 crore in Indian shares since the start of the year until August. In August, they invested a net of ₹ 1,320.30 crore in the asset class, data from Securities and Exchange Board of India (Sebi) showed, and the interest seems to be continuing.

Provisional data from the National Stock Exchange (NSE) showed foreign institutional investors (FIIs) and domestic institutional investors (DIIs) were net buyers of ₹ 390.63 crore and ₹ 485.15 crore of Indian shares, respectively, on Tuesday.

“Flows are pointing to investors’ greater confidence in the revival of the economy," said Navneet Munot, chief investment officer at SBI Mutual Fund.

“Risk appetite is strong. People are willing to take more risk, and, hence, they have been looking at mid-cap and small-cap space with greater interest than before," added Munot.

Around 371 of BSE 500 stocks advanced in trade, while 125 declined. The broader market breadth was also positive, with the gainers beating the losers in the ratio of 1.5:1.

“The demand for these stocks is rising, and that is backed by mutual funds as they looked to increase returns. Valuation for some individual stocks are definitely expensive," said Deven Choksey, group managing director of KR Choksey Investment Managers Pvt. Ltd.

HT Media Ltd, Dr Lal PathLabs Ltd, and Gujarat Mineral Development Corp Ltd were the top gainers among BSE 500 on Tuesday. They gained 12.41%, 8.85% and 8.27%, respectively.

Year to date, BSE-500 index is up 10.86%, while the Sensex index has added 8.52%.

“It’s a billion-dollar question," said Choksey when asked if this rally was here to stay.

“If we get more papers in the market, the demand and flows will partly get absorbed there," added Choksey.

Ravindra Sonavane contributed to this story.

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