This was largely on the back of robust net inflows from FPIs, coupled with the strong performance of the Indian equity markets. 

''As of the quarter ended June 2021, the value of FPI investments in Indian equities stood at USD 592 billion, which was considerably higher than the USD 552 billion recorded in the previous quarter, a spike of around 7 percent,'' the report noted. 

As of June 2020, the value of FPI investments in Indian equities had been USD 344 billion. 

However, overseas investors' contribution to domestic equity market capitalization dropped marginally during the quarter under review to 19.1 percent from 19.9 percent for the March quarter. 

Offshore mutual funds form an important component of total foreign portfolio investment, apart from other large FPIs, such as offshore insurance companies, hedge funds, and sovereign wealth funds. 

For the quarter ended June 2021, FPIs were net buyers to the tune of USD 0.68 billion compared with the net inflow of USD 7.64 billion was recorded during the quarter ended March 2021. 

While the second wave of the pandemic prompted overseas investors to turn negative on Indian equities in April and May as they sold net assets worth USD 1.29 billion and USD 0.39 billion, respectively, they came back strongly in June to pump in USD 2.36 billion as the situation turned favorable for them. 

However, FPIs turned cautious toward Indian equity markets again in July. The U.S. Fed's hawkish statement that it might raise interest rates much earlier than assumed was the precursor for the change in their stance. 

''They (FPIs) also started to stay on the sidelines while waiting for stronger and more stable signs of recovery in the economy and for corporate earnings to be revealed after the second wave of the pandemic,'' the report mentioned. 

Besides this, rising valuations, the surge in oil prices, and firmness in the US dollar made them wary of the near-term risks, it added. 

''While they chose to book profit with stock markets trading at near all-time highs, lingering risk of a potential third wave of COVID-19 in India added to their concerns. The challenges to the near-term prospects reduced their appetite for Indian equities. Consequently, FPIs were net sellers to the tune of USD 1.51 billion in July,'' the report said. 

It, further, pointed out that net outflows were not exceedingly high, signifying that foreign investors are cautious toward Indian equities rather than negative on them.