FPIs net inflow at Rs 14,600 cr in February

"After being net sellers in January 2017, FPIs pumped in funds post-Budget, especially after they received clarity on capital gains taxation as well as tax on indirect transfers," Vidya Bala Head Mutual Fund Research at Fundsindia.com said.

"Also, the demonetisation fears did not reflect much in the earnings numbers which could also be one more reason for FPIs to repose faith in the Indian markets. A lesser than painful demonetisation impact and the confidence arising from digitisation and resulting transparency could see FPIs viewing Indian markets more seriously," she added.

Besides, the no rate cut stance has caused some dips in the price of debt instruments (as yields moved up) offering opportunities for buyers, Bala said.

Finance Minister Arun Jaitley, in his Budget speech, proposed that category I and II FPIs should be exempted from taxation on indirect transfers.

"No change in long-term capital gains tax on equities has lightened investors' fears on transaction cost," said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.

Meanwhile, Nikkei Markit India Manufacturing PMI in January rebounded from the demonetisation downturn by increasing to 50.4, from 49.6 in December, amid rising order books, production as well as buying levels and expansion in the sector.

Further, SIAM's auto numbers have shown that passenger vehicle sales in India rose by 14 per cent in January.