This comes following a net outflow of USD 3.22 billion by foreign portfolio investors (FPIs) in the quarter ended September 2019.
According to a Morningstar report, foreign investors started the quarter on a subdued note as they turned risk-averse with fears of a global recession and trade wars gaining momentum.
Moreover, the slowdown in the Indian economy, paired with world bodies like the International Monetary Fund, the Asian Development Bank, and Moody's cutting India's growth forecasts, also dented sentiments, it added.
"The scenario improved as the quarter progressed largely on the back of the government's intent to bring reforms and changes which are necessary for the economy to grow," the report noted.
Since August, the government has announced a series of measures to revive the economy and regain the confidence of foreign investors.
Some of the prominent measures included a roll-back of the superrich surcharge, the merger and recapitalisation of public sector banks, increased liquidity support for housing finance companies, and NBFCs, relief measures for the revival of the automobile sector, a bailout package for stalled projects in the real estate sector, and most significantly, rationalisation of corporate tax rates.
"Gradually, these measures started to find favour among foreign investors as they started returning to the Indian equity markets. Better-than-expected earnings growth also encouraged investors," Morningstar said.
As per the report, FPIs went on a buying spree through the quarter ended December 2019 notably, they were net buyers in all three months of the quarter as they pumped in net assets worth USD 6.31 billion.
Also, the value of FPI investments in Indian equities surged significantly during the quarter under review largely due to huge inflows from such investors with gains posted by the Indian equity markets.
The value of FPI investments in Indian equities stood at USD 432 billion, which is considerably higher than the USD 402 billion recorded in the previous quarter.
This was the highest in the last eight quarters, with the previous high of USD 442 billion during the three months ended December 2017.
Consequently, such investors' contribution to Indian equity market capitalisation also moved up to 20.9 per cent from 19.3 per cent in the previous quarter. SP MRMR