(Bloomberg News) Indian stocks attracted a record 843.6 billion rupees ($18.7 billion) from foreign funds this year, driving a rally that made the nation's equities index the best performer among the world's 10 biggest markets.

Overseas investors purchased 35.4 billion rupees of shares and sold 26.5 billion rupees yesterday, the Securities and Exchange Board of India said today. They sold 9.74 billion rupees of bonds, paring total debt purchases this year to 465.9 billion rupees.

International investors, seeking to participate in the accelerating pace of economic growth in the South Asian nation, added 8.95 billion rupees in equities yesterday, topping overseas purchases last year, according to data compiled by the market regulator. India's gross domestic product expanded 8.8 percent last quarter from a year earlier, the most among major economies in Asia after China.

"The Indian economy is going to quadruple in the next 10- 12 years," said Sunil Singhania, head of equities at Reliance Capital Asset Management Ltd., India's biggest money manager, with $23 billion in assets. The pace of India's growth led to "different perception among overseas investors. Foreign inflows will continue over the next five to six years."

Foreign fund inflows to India's equities have increased 55 percent this year, making the benchmark index the most expensive in Asia and among the BRIC markets that also include Brazil, Russia and China. Foreigners have invested 240.8 billion rupees in equities this month.

'Not Cheap'

"In the near term, we are not cheap, but if someone is investing for the long term he need not worry about the near term," Singhania said in an interview in Mumbai yesterday. "If the economy grows at 8 percent, then corporate earnings might grow at more than 20 percent in the next two three years."

The flows have pushed the benchmark Sensitive Index to the highest level in more than 2 1/2 years and helped the rupee rebound 6.1 percent from an eight-month low in May. The Sensex has climbed 14.3 percent this year, the most among the world's 10 largest stock markets by value, according to data compiled by Bloomberg. Equity purchases this year include 218.3 billion rupees from the primary market, the regulator said.

Billionaire investor Rakesh Jhunjhunwala said this week Indian equities are set for a "multiyear" bull market.

Overseas investors have invested 3.98 trillion rupees in stocks and 788.5 billion rupees in bonds since they were allowed into the country in 1993. Flows reached 834.2 billion rupees in 2009, sparking the biggest rally in 18 years. They withdrew a record 530 billion rupees from stocks in 2008, setting off the worst annual slump.

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