According to experts, the inflows are expected to improve further in 2014 as the state assembly election results have brightened the chances of a BJP-led government at the Centre, on which foreign investors are said to be putting their bets, according to experts.
In 2012, Foreign Institutional Investors (FIIs) made a net infusion of Rs 1.3 lakh crore (USD 24 billion) in equities.
At gross level, Foreign Institutional Investors (FIIs) purchased stocks worth about Rs 7.96 lakh crore in 2013 and sold equities to the tune of Rs 6.84 lakh crore -- translating into a net inflow of Rs 1,13,136 crore (USD 20.10 billion) so far.
This was the second consecutive yearly inflows by foreign investors after pulling out a net amount of Rs 2,714 crore (USD 358 million) from the share market in 2011.
However, overseas investors pulled out Rs 50,847 crore (USD 8 billion) from the bond market in 2013. This takes the overall investment by FIIs into the debt and equity market together to Rs 62,288 crore (USD 1.2 billion).
Despite their unpredictable 'hot money' investment, these overseas entities have been amongst the most important drivers of Indian stock markets.
The huge inflows came despite the number of FIIs registered in India dipping to 1,739 this year from 1,759 at the end of 2012.
Destimoney Securities MD and CEO Sudeep Bandhopadhyay said, "FIIs are expected to be bullish on the Indian stocks in 2014, despite the US Federal Reserve's decision on tapering."
"FIIs are looking forward to a stable government that can move reforms process faster, irrespective of which political party comes to power at the Centre next year. Besides, a strong performance by BJP in the recent assembly elections have further strengthen the chances of a stable government at the Centre," he added.
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.
This is the third time in history that net FII inflows for a year have crossed the Rs 1 lakh crore mark and analysts are optimistic about the next year.
In 2010, overseas investors had made a record Rs 1.33 lakh crore (USD 29 billion) net investment into the share market.