Sensex, Nifty hit new highs but sentiment cautious

India's equity indices closed at fresh all-time highs on Monday, extending their recent record-breaking run but gains were modest as traders see risks to the market at these levels.

Nifty gained 0.2%, or 42.8 points, from the previous day's close to close at 25,278. Sensex rose 194 points and closed at 82,559.

Nifty closed positive for the thirteenth straight session on Monday while Sensex ended higher for the tenth session in a row. Both indices advanced close to 1% in the last five sessions.

The Volatility Index or VIX - the market's fear gauge - jumped 5% to 14, suggesting options traders are cautious about near-term market prospects.

The Mid-cap 150 index declined 0.29% while the Small-cap 250 index ended 0.1% lower on Monday. Out of the 4,187 stocks traded on the BSE, 1,705 advanced, while 2,336 declined.

"The mid- and small-caps have not made new highs as frequently as the benchmark indices which means fewer stocks are participating in the up-move," said Rohit Srivastava, founder indiacharts.com. "However, some pullback is required before the markets move to higher levels."

Foreign portfolio investors (FPIs) on Monday net bought shares worth ₹1,735.46 crore. Their domestic counterparts also purchased to the tune of ₹356 crore.

The outcome of the US Federal Reserve's rate-setting meeting on September 17-18 will be the next trigger for global markets. While the American central bank is expected to cut interest rates this month, the bigger focus is on the extent of the easing.

"Global markets are pricing in the improved liquidity driven by expectations of a rate cut cycle in the US in addition to the fact that there are no negatives," said Srivastava. "Most of the US economic data is mixed, which implies a soft landing in the US."

Bajaj Financial Services gained 3.3%. Bajaj Finance and HCL Technologies rose 3% and 2.7%, respectively.

Nifty Metal and Nifty Pharma indices declined close to 1% each on Monday while Bank Nifty and the IT index advanced 0.17% and 0.44%, respectively.

Elsewhere in Asia, China declined 1.1%, Hong Kong fell 1.65% and Taiwan ended 0.15% lower. South Korea ended 0.25% higher and Indonesia gained 0.31%.