Overseas investors poured in over Rs 26,000 crore ($5.08 billion) in Indian markets in January 2012, the highest one-month net inflow in 16 months, as sentiments got a boost from easing inflation concerns and attractive valuations.

Foreign Institutional Investors (FIIs) purchased equities and debt securities worth a gross amount of Rs 76,548 crore in January 2012, while their gross sales for the month were worth Rs 50,219 crore, translating into a net inflow of Rs 26,329 crore, as per data compiled by the market regulator Sebi.

This is the highest net investment by FIIs in stocks and bonds since September 2010.

Market experts said that strengthening of rupee and easing concerns over inflation led to the foreign investors stepping up their stock purchases during the month.

"European situation is also settling down, which gave the investors a necessary appetite to invest in Indian market. In addition, attractive valuation also helped FIIs to pour money," Destimoney Securities MD and CEO Sudip Bandyopadhyay said.

CNI Research CMD Kishor Ostwal said, "Appreciating rupee gave overseas investors opportunities to flock towards the Indian market."

He further said, "We might not witness the same level of investment in this month (February), as there is no trigger which can drive FIIs to pump in fresh capital."

FIIs had mostly stayed away from Indian equities in 2011 but made a net investment worth Rs 10,358 crore in stocks the first month of 2012. However, they appeared more bullish on the debt market, where they made a net inflow of Rs 15,971 crore.

"FIIs investments in debt market are rising because of higher yields on local bonds," Bandyopadhyay said.

In terms of equity investment, foreign funds have poured in maximum money in infrastructure and pharma stocks, he added.

Buoyed by sustained FII inflows, the stock market barometer Sensex also gained over 11 per cent in January. The index finished at 17,193.55 on January 31, the last trading session of the month, gaining 330 points from its last close.

In the year 2011, FIIs purchased stocks and bonds worth Rs 8 lakh crore, but sold securities worth Rs 7.9 lakh crore, resulting in a net investment of Rs 17,480 crore during the year.

Investors flocked toward the debt market in 2011, making an investment of Rs 20,293 crore, but stayed away from the equity market, pulling out Rs 2,812 crore.