Foreign investors pumped in more than Rs 15,500 crore (USD 2.5 billion) in Indian equities this month, ahead of the tapering of the US Federal Reserve's stimulus programme starting in January.
Foreign institutional investors (FIIs) were gross buyers of shares worth Rs 61,492 crore and sellers of equities worth Rs 45,940 crore till December 27, resulting in a net inflow of about Rs 15,553 crore (USD 2.51 billion), according to Sebi data.
So far in 2013, FIIs have invested Rs 1.13 lakh crore (USD 20 billion) in the domestic stock market. There are still two trading days left in the current month.
The US Federal Reserve decided to taper its monthly bond-buying programme, raising concerns that funds available for investing in emerging markets would be reduced.
Starting next month, the US central bank will cut its purchases of bonds to USD 75 billion from USD 85 billion, according to a statement after the Federal Open Market Committee meeting on December 18.
Analysts also said the Bharatiya Janata Party's wins in assembly polls in Rajasthan, Madhya Pradesh and Chhattisgarh had sparked optimism about its chances in the 2014 general elections. The BJP also emerged as the single largest party in Delhi.
Some experts believe BJP prime ministerial candidate Narendra Modi's position has been strengthened. They expect a BJP-led government would be more pro-reform and speed up legislative steps needed to spur economic growth.
In addition, overseas investors infused a net amount of Rs 5,380 crore (USD 872 million) in the debt market so far this month. Since the beginning of 2013, they have withdrawn Rs 50,758 crore (USD 8 billion).
As of December 27, the number of registered FIIs in the country stood at 1,742 and the total number of sub-accounts was at 6,399.