With this rally, Sensex has gained by a whopping 403 points after the dissolution of the Lok Sabha last week. Belying expectations, Sensex which had touched the bottom of 3245.27 on April 27 has now crossed the 3600-mark to 3648.86. The major force behind the bull rally has been FIIs who have been buying fundamentally strong scrips in the last one month. The FII buying has not been confined to the domestic market. The GDR index too has been moving in tandem, registering a 11 per cent rise.

Similarly, the S&P CNX Nifty index of the National Stock Exchange (NSE) also gained by 27.4 points to close at 1,046.95 points. Stock exchanges in Calcutta, Delhi and Chennaialso recorded huge gains. ``The market was agog with rumours that FIIs will be pumping in more funds in the coming days. They had already brought in over Rs 1,000 crore in April,'' said a BSE broker.

FIIs continued to corner heavy-weighted scrips like ITC, L&T, SBI, Infosys, Satyam Computer and Corporation Bank on account of their impressive performance shown in the annual working results. Likewise, the domestic funds and institutions showed interest in picking up cyclical stocks. Tobacco giant ITC was in limelight and led the rally on brisk institutional support. Strong rumours of a bonus issue propelled the ITC scrip to its all-time high of Rs 1,106 on the BSE.

Infosys Technologies listed on the Nasdaq as American Depository Share (ADS) and trading at a discount of nearly 17 per cent on the Indian bourses till Wednesday registered a sharp rise on interested buying. Bank scrips, with the leadership of SBI, were in keen demand on aggressive buying by some foreign funds. Software, pharma and FMCG scripscontinued to be the toast of operators and foreign funds.

Reflecting the bullish trend, Sensex opened at 3561.75 and gradually moved up to the day's high of 3659.36 before closing at 3648.86, registering a smart rise of 91.79 points or 2.58 per cent as against yesterday's close of 3557.07. The BSE-100 index also flared up by 35.62 points to 1601.94 from previous close of 1566.32.

Cyclical commodity stocks have also become hot favourites of marketmen. Grasim hit the upper circuit at Rs 137.55. Others like ONGC at Rs 134.45 and VSNL at Rs 813 continued to hit the upper limit of the circuit breaker for the second consecutive date. Market players find it difficult to understand the optimism of FIIs for the Indian bourses and say that the acquisition of shares is also `by default' with the increased allocations of FIIs.

Says Hemendra Kothari, chief of DSP Merrill Lynch, ``FIIs are bullish about India. Many FIIs are allocating more funds to emerging markets like India. Moreover, the corporate sector is alsoshowing signs of improvement''. Further, the steady movement of the rupee against the dollar, the rising foreign exchange level and exports and low inflation rate have added to the bullish trend.

After the dissolution of the Lok Sabha, FIIs have brought in Rs 538 crore. Key stocks picked up by the FIIs have driven the market capitalisation. Reliance's market cap has shot up from Rs 11,463 crore on April 28 to Rs 13,887 crore. ITC's market cap has surged from Rs 22,613 crore to Rs 27,097 crore and that of SBI from Rs 8,063 crore to Rs 10,333 crore. That FMCG stocks have been left out in the rally is reflected in the fall in market cap of Hindustan Lever from Rs 41,233 crore to Rs 40,636 crore.

``The continuous buying by FIIs seems to be a cause of worry for the local short sellers. Despite the sharp surge in the market indices there has been no change in the net long positions at the exchange. This could lead to frenzied short covering or backwardation at many more counters," said a broker.