Across India, tens of thousands of retail investors have benefited from a stock market boom in the past year. Foreign investors are also attracted by the country's growing economy.

When 58-year-old Rakesh Mehta popped the champagne on December 31, it was not just to greet the New Year. Mr. Mehta was also celebrating the massive returns on his investments in the Indian capital markets in the past year.

For Mr. Mehta, India's stock market rally has been a bonanza. When he retired a year and half ago, the former army colonel worried about managing on his shrinking income because interest rates in banks were falling steadily. Then he decided to take a risk, and diverted most of his savings and pension funds from government bonds and bank deposits into a range of mutual funds.

The decision paid off. Mr. Mehta says he got a return of close to 50 percent on his investments in 2005. He is now planning a trip to East Asia to escape the cold Delhi weather.

"It is amazing. I never expected my savings to multiply like this. I can do things I never thought would be easy after retiring - afford overseas vacations, upgrade my car," he said.

Like Mr. Mehta, tens of thousands of middle class investors are pumping their savings into the capital markets, which have risen for the third year in a row.

The stock market has not disappointed them so far. In 2005, it beat even the most optimistic predictions to rise by 40 percent.

Retail investors were not the only ones benefiting from the boom. The buoyant stock markets and expectations that India's strong economic growth would continue prompted foreign investors to buy a record $10.6 billion in shares in the last year.

As India simplified investment rules, several global funds entered the market, including the world's biggest mutual fund company, Fidelity.

Prithvi Haldea, head of the research house Prime Database in New Delhi, says many investors, including foreign institutional investors, or FIIs, are hungry for Indian stocks.

"We have had not only domestic investors, domestic institutions, mutual funds, retail investors who have used surpluses waiting to invest in the market, but more importantly, we have seen astounding FII inflows, and the horizon has expanded beyond the traditional FIIs [from] U.S. and U.K. We saw a lot of Japanese money coming into the market this year," said Mr. Haldea.

Many new investors are attracted by predictions that India will continue to generate annual economic growth of around seven percent.

But some investment bankers are warning that the dream run may soon come to an end. They say the huge demand in the past year has pushed up prices and Indian stocks are no longer cheap. As a result, they expect the stock market to moderate in the coming months.