By Abhishek Vishnoi
MUMBAI (Reuters) - The BSE Sensex and Nifty hit a record high for a fifth straight session on Friday as state-run lenders such as State Bank of India (SBI) continued their recent rally after the Reserve Bank of India (RBI) extended the deadline for implementing Basel III capital-raising rules.
Heavy buying by overseas investors also continued to help underpin gains, sending the Nifty to its first weekly gain in three.
Overseas funds' net purchases of shares have reached nearly $3 billion so far this month, according to regulatory data.
A combination of foreign flows, hopes for a recovery in the domestic economy, and bets that the main opposition Bharatiya Janata Party, perceived as more business-friendly, will come to power have driven a 6.8 percent gain in the Nifty in 2014 so far.
Investors say the RBI's policy review on April 1, where it is widely expected to keeps rates unchanged, and the coming general elections would act as the next key catalysts for markets.
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"The outlook remains bullish. The rally would extend itself till the elections are over. RBI may keep rates unchanged," said G Chokkalingam, founder of research and fund advisory company Equinomics.
The Nifty rose as much as 0.9 percent to an all-time high of 6,702.60, while the Sensex gained 0.67 percent to a lifetime high of 22,363.97.
The Sensex closed 0.57 percent higher for the day and 2.7 percent for the week, while the Nifty ended up 0.82 percent on Friday while posting a weekly gain of 3.1 percent.
State-run banks extended recent gains after the Reserve Bank of India on Thursday extended the deadline for banks to implement Basel III capital rules by a year to March 31, 2019, due to concerns from the industry on potential stress to asset quality.
State Bank of India gained 3.5 percent, Bank of Baroda
Banks have surged this month with the NSE bank sub-index up 18.5 percent on hopes of a recovery in the domestic economy, central bank's potentially easing monetary policy and broker upgrades.
Software exporters gained despite the rupee's rise to its eight-month high after global rival Accenture Plc
That helped bring some relief after Tata Consultancy Services Ltd
HCL Technologies Ltd
Hindalco Industries
Ramco Cements Ltd
Godrej Properties Ltd
However, among stocks that fell, HDFC Bank
(Editing by Subhranshu Sahu)