Traders said the market was in a buying frenzy and a move by the Reserve Bank of India on Saturday to raise margins on bank lending on shares would have only a muted impact.
Traders expect the Bombay exchange's benchmark 30-share index to surpass its record high early in the week, after it hit a closing high on Friday.
The index ended Friday at 6,026.59 points, not far from its lifetime high of 6,150.69 struck on February 14, 2000. It rose 5.7 percent last week.
Traders were wary of making specific predictions on index levels, with the National exchange's broader 50-share index having hit a lifetime high of 1,917.05 on January 1.
The Reserve Bank of India on Saturday asked commercial banks to raise the margin on all advances made by them against shares or for financing participation in Initial Public Offerings to 50 percent from 40 percent, with immediate effect.
It also asked banks to raise the minimum cash margin on guarantees issued by banks for capital market operations to 25 percent, from 20 percent till now.
Foreign funds made net purchases of around $6.7 billion in Indian equities in 2003, their highest net investment in a year since they were first allowed to invest in India a decade ago.
They now have net investments of about $23 billion in India, mostly in shares.
Besides fund inflows, market attention will be on earnings numbers for the October-December quarter, which start rolling out this week.
Markets expect strong numbers as the Indian economy, Asia's third-largest, is sizzling. Gross domestic product grew 8.4 percent in the year through the July-September quarter.
Investor favourite Infosys Technologies Ltd, India's largest listed exporter of software services, is due to issue quarterly results on January 9.