Mumbai: Indian benchmark indices extended their rally for the fourth consecutive day fuelled by news of an improving economy and de-escalation of tension on the India-China border.

The Sensex, which has rallied 38 per cent in the last three months, gained 519.11 points to close above the 35,000-level for the first time since March 11. The Nifty was up 159.80 points, or 1.55 per cent, to close at 10,471. Both indices have gained almost 6 per cent in the last four trading sessions with foreign portfolio investors (FPIs) pumping in over Rs 2,000 crore.

“Markets are not just driven by liquidity but there is a lot of improvement on the ground that we are noticing,” said S Krishna Kumar, CIO, Sundaram MF. “Slowly and steadily the improvement is getting factored in into the prices, be it the frontline banks or the NBFCs or the mid- and small-caps.”

Larsen & Toubro contributed most to the Sensex rally with 6.68 per cent surge in stock price after the company won a large EPC contract.

The short-term trend for the Nifty continues to be positive, said technical analysts. “The upside target of 10,600-10,650 is intact for the next few sessions, before any profit booking from the highs,” said Nagaraj Shetti, technical research analyst at HDFC Securities.