Overseas investors have pumped in over Rs 21,000 crore (over $ 3 billion) into Indian equity markets in March, after pulling out massive funds in the preceding four months.
However, Foreign Portfolio Investors (FPIs) have pulled out Rs 1,476 crore in the debt markets during the period under review.
Market experts attributed the huge inflows to continued hopes that Reserve Bank of India (RBI) would bring down the monetary policy rate at its first policy meet of 2016-17 on April 5.
Additionally, a lower retail inflation at 5.18 per cent in February provides more room for RBI to act, they added.
According to the data available with depositories, Foreign Portfolio Investors (FPIs) invested Rs 21,143 crore in equities last month, while they withdrew Rs 1,476 crore in the debt markets, leading to a net inflow of Rs 19,667 crore ($ 2.93 billion).
FPIs have turned net buyers of equities in March after pulling out a massive Rs 41,661 crore from the market in the previous four months (November to February).
Overall, in 2015-16, FPIs have pulled out Rs 14,171 crore from equities and another Rs 4,004 crore debt taking the total to Rs 18,175 crore. This was the first outflow of overseas funds from Indian capital markets in seven years.
Capital inflows by FPIs are often referred to as hot money due to their unpredictability, although the funds continue to remain one of the key drivers of the stock market.