I found an answer by myself with help of http://android-developers.blogspot.in/2011/04/customizing-action-bar.html However, this does not completely solve my problem. It adds a divider for Title, and also one for the home Icon. There are also left and right separators. That too is adjustable.
I added android:selectableItemBackground to my theme.
<item name="android:selectableItemBackground">@drawable/action_bar_item_selector</item>
action_bar_item_selector.xml
<?xml version="1.0" encoding="utf-8"?>
<layer-list xmlns:android="http://schemas.android.com/apk/res/android" >
<item android:drawable="@drawable/actionbar_compat_separator"></item>
<item android:left="1dp" android:drawable="@drawable/actionbar_compat_item"></item>
</layer-list>
actionbar_compat_separator – is my seperator drawable
and actionbar_compat_item is my selector for action bar item.
EDITED
I have found a better solution to my problem. It works well.
<item name="android:actionButtonStyle">@style/ActionButton</item> to my Theme
<style name="ActionButton" parent="android:style/Widget.Holo.Light.ActionButton">
<item name="android:background">@drawable/action_bar_item_selector</item>
</style>