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Buildings are reflected on the glass windows of the NSE (National Stock Exchange) building in Mumbai, India, December 27, 2016.Reuters file

India's NSE Nifty index crossed the 10,000-mark for the first time on Tuesday, as foreign and domestic institutional investors continued to buy in local equity markets.

Nifty 50 Index opened at 10,010.55 points, up 0.44 percent from the previous close. Attending this mark makes it one of Asia's best performing stock markets. Although setting a record, it dropped 45-50 points as traders became cautious ahead of the US Federal Reserve meeting slated later for Tuesday. Mint quoted a Bloomberg report, saying the Fed Reserve is expected to keep rates on hold.

The rise in Indian stocks has been primarily fuelled by foreign institutional investor (FIIs) buying. So far this year, FIIs have bought a net of $8.73 billion, according to NSDL data.

The bull run in the market has, however, running on excess liquidity with not much of an increase in earnings expectations. Another big factor for the phenomenal rise in stock value has been the shift of Indian savers to more financial assets as prices of gold and property moderated after the government's ban on high-value currency notes, reported BloombergQuint.

Nifty has become one of the most expensive indices in the world. Currently, it is trading at 19.2 its expected earnings for the current financial year, as compared to a multiple of 17.6 at the start of the fiscal year, reported Mint.

Among the Nifty stocks, Indiabulls Housing Finance was the top gainer, up 2.6 percent followed by Bharti Infratel and Vedanta, which advanced 2.5 percent and 1.7 percent, respectively.

"It's high time that markets consolidate. Markets are running ahead of fundamentals, only liquidity is driving the rally. Valuations are expensive as earnings are not going to see growth," Manish Sonthalia, head of equities for Motilal Oswal Asset Management's portfolio management services said to Mint.

In the short term, we may be looking at possible blow out rally as Nifty crosses 10,000 but we could witness a deep correction in near future.