During January 2001, net investments were Rs 4581.8 crore as compared to Rs 196.6 crore for the corresponding month last year. The gross purchases and sales were Rs 9,147.9 crore and Rs 4,556.1 crore respectively.

On February 2, FIIs' net investments were to the tune of Rs 400 crore, according to market sources.

Commenting on the sharp inflows of FII funds into the markets, Mr Anand Rathi, president, Bombay Stock Exchange (BSE) said: ``At this time of the year, the valuations are looking very attractive for the FIIs.

There's also a feeling that despite all the problems of a slowdown and sluggishness in the economy, things are moving in India. Besides, the slowdown in the United States may actually be a good sign for Indian information technology companies, since there may be some work which may shift from the US tech companies to Indian ones as the US companies begin cutting costs on infotech. ``Also, since the US markets are tricky, FII allocations are now coming increasingly towards India.''

Mr SP Jain, CMD of Networth Stock Broking, told The Financial Express: "This is very encouraging news in the days when market has been gripped by scores of developments which were negative in nature like the devastating earthquake, the Supreme Court upholding Sebi's contention on brokers' registration fee and the surcharge on income tax and corporate tax imposed by the Union government.''

One reason for the huge inflows is being attributed to the fact that fund managers, who are sitting on huge amounts of cash, are diverting the funds to regions other than the US because of the nervousness in the US market funds, feel FIIs.

"As a result, all emerging markets are seeing inflows and so is India," said Mr John Band, chief executive officer of Ask-Raymond James.

Ask-Raymond James executive director Anand Tandon said: "Fund managers feel that there is a risk of investments in US and India is, therefore, being courted."

"This year asset allocation has increased to the Indian market," Mr Band added.

Seconding Mr Rathi's view, Mr Band said the reason could be that interest has been revived in the old economy stocks globally and Indian valuations are currently attractive in the Asian region. Adds Mr Tandon, "At this stage, India is looking attractive because others are looking worse." Market players said if this trend in foreign institutional investment activity continues, then the markets may enter into a prolonged bull phase as though the foreign institutional investments may be considered "hot money", liquidating these huge holdings would also take a lot of time.

In other words, the pre-Budget rally that was interrupted by the devastating earthquake last week in Gujarat, and took its toll on market sentiment is now back on course and the markets are well poised for a fresh rally, said Mr Jain.

Brokers say another important reason behind the increased FIIs inflows is the recent cut in the Fed-rate. As the US economy has slowed down, more and more funds are being pumped into the emerging markets of the Asia-Pacific region. Simultaneously, the reduction in interest rate has made investments in the United States more unattractive even in fixed income-generating instruments whereas in case of emerging markets like India, Taiwan and other south Asian countries, the rate of return on capital employed is much higher as compared to the US, brokers said.