Foreign net inflows into Indian stocks reached 208.1 billion rupees as of January 30, the strongest January since at least 1998 and a seventh consecutive month of net purchases.

The strong buying has cheered domestic investors after Indian stocks attracted foreign net buying of $24.4 billion in 2012, although that came on the back of heavy selling in 2011.

Whether those flows will continue this year has been a big question mark as valuations -- currently at around 14 P/E forwards -- catch up to historic averages of around 16.

Credit Suisse has an interesting take: despite the strong foreign inflows, Indian stock markets ranked 35th out of the 50 largest global markets this year as of January 13 in terms of U.S. dollar returns and 38th over the past 12 months.

Credit Suisse estimates that by mid-February, Indian stocks could rank 42nd on a year-to-date basis and 44th on a 12-month basis.

"This has important lessons in our view: that India's absolute performance is likely the result of a global move into equities, and not so much due to 'cyclical recovery' or 'bottom in earnings'," Credit Suisse writes in a note.

"For the next move up or down, therefore, one must look at global triggers more than domestic ones," it adds.