Metal, banking stocks fuel Sensex to new high

After the gap-up opening, the indices traded range-bound in the first half of the day.

Analysts said the dominant trend in the market in August so far has been the weakness in the broader market and a flight to the safety of large-caps, particularly IT and defensives like FMCG stocks. In August, till now, the midcap index is down 8 per cent and the smallcap index by 10 per cent.

The outperformance of the IT Index (12 per cent rise in August so far) is a flight to quality triggered by high valuation concerns. The preference for defensives reflects growing concerns about high valuations and the possibility of a sharp correction. Nifty is likely to face resistance at higher levels as (foreign institutional investors) FIIs are in a sell mode.