The BSE Sensex hit a second consecutive record closing high on Thursday after Larsen & Toubro surged as its quarterly profit margins beat expectations, although falls in rate-sensitive auto makers prevented broader gains.
Indian shares have been flirting with record highs since late last year, driven largely by heavy buying of blue chip exporters by foreign investors, worth $20 billion in 2013.
However, a slew of uncertainties are clouding the outlook, including general elections due by May, U.S. Federal Reserve tapering, and more recently, a recommendation from the central bank to overhaul monetary policy.
"Overall the market remains sceptical, mainly on macro concerns. Though market participants remain confident about growth, the political situation is worrying. We are cautiously optimistic in the medium term," said Deven Choksey, managing director at KR Choksey Securities.
"We expect RBI to come back to the growth stand rather than controlling inflation, and we need to wait and watch that."
As part of those recommendations, the Reserve Bank of India wants to prioritise taming high consumer inflation, raising the prospect of higher interest rates and, thus, concerns ahead of its policy review on Tuesday.
The benchmark BSE Sensex rose 0.17 percent to a record closing high of 21,373.66, marking four straight days of gains during which it has gained 1.5 percent, still below an all-time high of 21,483.74 hit on Dec. 9.
The broader Nifty gained 0.11 percent to 6,345.65, just short of its record closing high of 6,363.90 hit on December 9.
Foreign investors have remained buyers of Indian shares this year, with net purchases totalling 24.41 billion rupees so far.
Larsen & Toubro Ltd rose 2.8 percent after the company's October-December margins beat estimates, while other engineering firms such as Bharat Heavy Electricals Ltd gained 0.74 percent.
Shares in Raymond Ltd closed up 1.08 percent after the textiles maker reported late on Wednesday a more than four-fold increase in its October-December quarter net profit.
However, rate-sensitive auto makers fell on worries that higher interest rates would curb sales by making financing vehicles more expensive.
Mahindra & Mahindra Ltd fell 2.88 percent and Tata Motors Ltd dropped 0.65 percent.
Shares in gold retailers, including Titan Co and Gitanjali Gems , rose sharply after ruling Congress party leader Sonia Gandhi wrote to the federal government for a cut in the record import duty on gold.
Shares in Biocon Ltd and KPIT Technologies fell after earnings disappointed some investors.