Moreover, the US Federal Reserve's decision of leaving its stimulus programme unchanged also encouraged foreign investors to park funds in the Indian equities.
Inflows in equities were about Rs 13,228 crore (USD 2.09 billion) during September 2-27. There is just one trading session left for this month.
However, there was a pull-out of Rs 6,016 crore (USD 965 million) from the debt market, still leaving behind a net inflow of Rs 7,213 crore (USD 1.12 billion), according to latest Sebi data.
The inflows follow a net withdrawal of nearly Rs 16,000 crore (about USD 2.5 billion) from the domestic capital markets in August.
Marketmen said that renewed buying by foreign institutional investors (FIIs) was witnessed after Rajan took over as the RBI chief and announced a slew of measures to attract capital flows and boost economic growth.
Rajan, who took over as RBI chief on September 4, had announced various steps to attract dollar inflows, including enhanced limits for exporters to re-book cancelled forward exchange contracts and a window for banks to swap foreign currency deposits.
The local currency, which has been deprecating since May, has zoomed by around Rs 3.2 or about 4.85 per cent so far this month. It closed at 62.51 against the US dollar on Friday. On August 28, it had touched all-time low of 68.85.
Besides, Fed's decision to continue with its monthly USD 85 billion bond buying programme and wait for more signs of growth recovery have encouraged FIIs to invest in Indian equity market.
Since the beginning of 2013, foreign investors have infused a net Rs 73,398 crore (USD 13.7 billion) in equities, while they have withdrawn Rs 36,914 crore (USD 5.7 billion) from the debt market.
There had been a turmoil in the global markets after the US Federal Reserve said in May that it may taper the bond buying programme later this year, and end it next year if the US economic recovery is up to its expectations.
The programme, through which Fed infuses liquidity in the US market, had driven asset prices higher including those in emerging markets, and there are fears that inflows may be hit if the US monetary stimulus comes to an end.