Mumbai: Foreign Institutional Investors (FIIs) have been bullish over Indian equities markets since 2012 opened as declining inflation and a clear signal from the Reserve Bank of India (RBI) that interest rates will be cut enthused business confidence.

According to data available with the Securities and Exchange Board of India (SEBI), FIIs have been net buyers till Jan 27 to the tune of $1.78 billion. Last week saw them pump in $611.88 million into equities.

Indian equities markets started off well in the current year with benchmark indices rallying over double digits in percentage terms, in just four weeks of January.

The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) gained 1,779.06 points or 11.51 percent to close Friday at 17,233.98 points, compared to the Dec 30 closing figure of 15,454.92 points.

At the National Stock Exchange, the 50-scrip S&P CNX Nifty moved up 12.5 percent or 580.4 points in the first four weeks of 2012 and closed Jan 27 at 5,204.7 points, as against the closing figure of the last trading day of 2011.

FIIs were far from optimistic about Indian stocks last year as the economy showed signs of slowdown and interest rates shot up after the RBI hiked key interest rates 13 successive times to tame inflation.

FIIs' net sales were worth $357.8 million in equity in the last year, a far cry from the record $28.83 billion they pumped into the Indian markets in 2010.

But latest data shows inflation coming under control. India's annual food inflation continued to be in the negative for the fourth straight week.

It was recorded at -1.03 percent for the week ended Jan 14, compared to -0.42 percent for the week ended Jan 7, and -2.9 percent and -3.36 percent consecutively in the previous two weeks.

Overall inflation, based on the wholesale price index (WPI), was down to a two-year low of 7.47 percent in December.

While the RBI in the third quarterly review of the monetary policy on Jan 24 did not cut the repo rate, it did reduce the cash reserve ratio by 50 basis points to infuse 3,200 crore to address the liquidity crunch.

The dovish stance of the central bank and a clear indication that further policy reviews would concentrate on driving growth has also helped investor confidence.