Britain's top share index scored its highest close in nearly five years on Monday as mergers and acquisitions speculation inspired a wave of buying in telecoms stocks like BT and Vodafone.
But some analysts are starting to question the sustainability of the FTSE 100's charge to levels around 5,900 points, which have not been seen since June 2001.
"6,000 is going to be a tough level to breach," said Royal Bank of Scotland market strategist Neil Parker. "A lot of the stocks that have been driving this forward are now at levels that nobody would consider cheap."
"The big question for me is, as all of this M&A talk dies down and the earnings-related move higher that we have seen begins to wane, where does the next impetus come from?"
The FTSE 100 share index closed 39.1 points, or 0.7 percent higher, at 5,897.8 points - having earlier touched 5,924.5. The mid-cap FTSE 250 set an intra-day record high of 9,580.5 and the FTSE All Share Index closed around five-year highs above 3,000 points.
"I am waiting for the (FTSE 100) hiccup - that could be between 3-500 points - 5,400 would look like a reasonable level to start buying again," Parker said.
Britain's largest fixed-line telecoms operator BT topped the FTSE 100 leaderboard, rising 5.1 percent on renewed speculation private equity groups are lining up a bid.
BT dismissed the talk last week but weekend newspapers reignited expectations of an imminent take-over.
Mobile phone giant and index heavyweight Vodafone closed 2.9 percent higher, buoyed by talk a special dividend would follow any sale of a stake in its Japanese arm.
News that Verizon Communications, one of the largest telecoms companies in the US, was working to buy Vodafone's 45 percent stake in their Verizon Wireless joint venture also boosted the stock.
M&A talk in the sector was encouraged after US company AT&T revealed a $67 billion purchase of Bell South.
Financial stocks supported the UK index after Europe's biggest bank HSBC reported record profits for a British bank, thanks to strong emerging markets offsetting higher spending at its investment bank.
HSBC rose 1.5 percent, fund manager Schroders gained 2.8 percent and insurer Aviva rose 2.3 percent.
Helping the FTSE 250 to another record breaking day, home shopping group N Brown rose as much as 15 percent on vague bid speculation and talk of a large automatic trade across mid-caps.
Mining, oil and gas stocks, which have helped push the FTSE 100 to 4-1/2 year highs in recent months, weighed on the index with Rio Tinto 0.8 percent lower and Cairn Energy down 1.8 percent.
Supermarket giant Tesco slipped 0.6 percent after Cheuvreux cut the stock from its top pick list.