It's not only in the Indian markets, the overseas markets - where global depository receipts (GDRs) are listed - are also witnessing a huge demand for Indian shares. In fact, prices of Indian GDRs have been rising at a faster rate than those in the domestic market. The Skindia GDR index has already touched the 52-week high and jumped by a whopping 28.81 per cent to 800.7. GDRs from the telecom sector appreciated by 37.49 per cent followed by hotel and auto sector gaining 21.62 per cent and 20.17 per cent respectively. The top GDR gainers were Indian Hotels (46.34 per cent), VSNL (46.21 per cent and L&T (45.98 percent).

``Things started looking up in March. The budget was generally welcomed by FIIs. The economic fundamentals were also favourable. Exports are rising, inflation is low, forex reserves have gone up...,'' said an official with a leading FII, adding that software, pharma and consumer goods shares were picked up by foreign funds.

According to Hemendra Kothari, chairman of DSP Merrill Lynch, FIIs have been allocating more funds to the Indian markets. ``There is nothing unusual about this. India has the potential to get $ 10 billion of portfolio investments,'' he said.

With Friday's gain of 59 points, Sensex had risen by 462 points to 3707 after the dissolution of the Lok Sabha. ``This has virtually destroyed the the theory that the markets will crash in the wake of the political uncertainty in the country. FIIs have understood that economic reforms are insulated from political expediency now. It's quite clear that all the parties want the reform process to continue,'' said a BSE director.

Kothari saida major factor which has attracted FIIs is dematerialisation of shares in India. With SEBI making compulsory demat in several A group shares, transfer of shares has become faster and bad delivery can be avoided. Against this background, marketmen expect another Rs 1,000 crore of FIIs funds to come in May.

FII sources said compared to other stocks in Asia, the prices of petrochemical, banking and commodity stocks are much cheaper in India and going by the tug-of-war between the growth and cyclical stocks, the price levels at which these stocks are available offer really good value. Besides, Many FIIs now prefer to put money in the Indian market unlike countries like Malaysia where the government is reversing the reform process.