Foreign institutional investors (FIIs) were gross buyers of shares worth Rs 18,944 crore and sellers of stocks to the tune of Rs 15,869 crore till March 7, resulting in a net inflow of Rs 3,075 crore (USD 498 million), according to data with the Securities and Exchange Board of India.
FIIs also infused Rs 10,358 crore (USD 1.67 billion) in the debt market during the period.
Market analysts said a sharp drop in the current account deficit and easing inflation, which bolstered expectations that the economy will see a turnaround soon, as well as hopes for a strong mandate for the next government prompted overseas investors to invest in equities.
Finance Minister P Chidambaram said last week the fiscal and current account deficits are under control and the economy is more stable than it was 18 months ago.
FIIs have sidelined their concerns on the slowdown in China and fears of further tapering by the US Federal Reserve.
FIIs, the major drivers of the Indian stock market, have helped push the benchmark BSE Sensex almost 800 points, or 3.79 per cent, to a record close in the past week.
Overseas investors have purchased a net Rs 5,193 crore of stocks so far in 2014. They invested a net Rs 1,404 crore in equities in February and Rs 714 crore in stocks in January.
As of March 7, there were 1,721 registered FIIs in the country and 6,306 sub-accounts.