During January 1-4, Foreign Institutional Investors (FIIs) were gross buyers of shares worth Rs 8,350 crore, while they sold equities amounting to Rs 3,830 crore translating into a net inflow of Rs 4,520 crore ($829 million), according to Sebi data.
In 2012, FIIs had made a net investment of Rs 1.28 lakh crore ($24.4 billion) in Indian equities. This was the second best year for the country's stock market after a record inflows of Rs 1.33 lakh crore ($29 billion) in 2010.
Market analysts said foreign investors have stepped up their buying activities after the US Senate passed a 'fiscal cliff bill' that delays the automatic spending cuts by two months and raises taxes on individuals earning more than $400,000 a year and households making more than $450,000.
"The huge inflows by FIIs could be attributed to approval of fiscal-cliff deal. Moreover, reform hopes in India would further attract foreign investors," a stock broker said.
There were worries that if US law makers were unable to avert the fiscal cliff issue that would have likely pushed the US economy back into recession and caused more sluggishness in the growth pace of the global economy, he added.
Apart from equities, FIIs have also infused Rs 2,108 crore in the debt market in 2013 so far taking the total investment tally to Rs 6,629 crore.
Buoyed by strong inflows, the BSE 30-scrip index, Sensex, rose 357 points or 1.84% last week to settle at 19,784.08 points on Friday.
As on January 4, the number of registered FIIs in the country stood at 1,760 and total number of sub-accounts were 6,357 during the same period.