By Sudip Kar-Gupta
LONDON (Reuters) - Gains at mobile telecoms group Vodafone and business supplies distributor Bunzl enabled Britain's top equity index to rise on Monday for the seventh straight session.
The blue-chip FTSE 100 index closed up by 0.4 percent, or 27.80 points, at 6,865.86 points - just 1.2 percent below its December 1999 record level of 6,950.60.
Vodafone and Bunzl together added the most points to the FTSE, and Mark Ward, head of execution trading at Sanlam Securities, expected the FTSE to hit a record level of 7,000 in the coming months.
"Bunzl and Vodafone are looking good. We've got a 7,000 target for the FTSE in the next few months."
Vodafone and Bunzl offset the impact of a 2.8 percent fall at heavyweight bank HSBC. HSBC posted lower-than-expected profits and warned about volatility in emerging markets, which have been hit by the unrest in Ukraine and currency slumps in Argentina and elsewhere.
Vodafone rose 4.1 percent to a 13-year high on speculation that it might become a bid target following its deal to sell its stake in Verizon Wireless to U.S. peer Verizon.
Analysts said Vodafone's stake sale is set to prompt the largest capital return in corporate history, which should bring in fresh cash for major pension funds which own Vodafone shares and could use that cash to re-invest in the FTSE.
Bunzl also advanced 6.9 percent to top the FTSE's leaderboard in terms of the biggest percentage gainer, after posting profits that beat forecasts.
The FTSE 100 rose 14.4 percent in 2013 to record its best annual gain since 2009. The index is up by around 2 percent since the start of 2014, recovering from a fall in January caused by the downturn in emerging market economies.
Logic Investments' trading director Darren Easton said he would not buy the FTSE at current levels, preferring to wait and see if the index could break above its January peak of around 6,867 points.
Beaufort Securities' chief investment strategist Mike Franklin was confident the FTSE would soon hit the 6,900 point level and later challenge making a record high of 7,000.
However, JNF Capital trader Rick Jones said the FTSE could consolidate around current levels in the near term, pointing to the fact that it was in technically "overbought" territory.
The FTSE 100 now has a relative strength indicator (RSI) reading on a nine-day basis of around 80. If a market has an RSI above 70, it indicates it is technically "overbought" while under 30 shows it is technically "oversold".
"The market looks a bit overbought right now," said Jones.
(Additional reporting by Atul Prakash; Editing by Susan Fenton/Mark Heinrich)