Kept out for long by scorching prices resulting from huge inflows by foreign institutional investors, the long reigning monarchs of the Indian markets, Indian mutual funds have made a strong comeback into the stock market in the last few days, registering record purchases.

The FIIs - by far the bigger of the two players in terms of market impact and turnover - started the tussle by suddenly reversing their nine-month-old buying trend in early April.

After having pumped in more than Rs 51,500 crore (Rs 515 billion) over the preceding nine and a half months, they have sold off equities worth Rs 15,500 crore (Rs 155 billion) since April 7 this year, equal to 30 per cent of their fresh investments since mid-June last year.

In fact, the current week has seen the biggest ever outflow of FII money from the Indian markets, with the last two days alone witnessing a massive Rs 3,400-crore (Rs 34 billion) sell-off. Wednesday's sell-off was only the second highest single-day net sale since March 1999.

Over the past 11 days, foreign investors have been reducing their exposure to the Indian secondary market at an average of more than Rs 1,000 crore (Rs 10 billion) a day.

However, during the sell-off, stock prices have been kept high by record purchases by local funds. While 2004-05 saw them invest Rs 14,300 crore (Rs 143 billion), Thursday alone saw Indian mutual funds pump in Rs 1,155 crore (Rs 11.55 billion) -- the biggest ever single day investment by them.

And, according to industry sources, it is not over yet. "We estimate that around Rs 4,000 crore (Rs 40 billion) is still left to be invested," says a fund manager.

While it is thought that around Rs 12,000 to 15,000 crore (Rs 120-150 billion) of fresh money flowed into the Indian funds this year, they invested Rs 6,500 crore (Rs 65 billion) during this month and Rs 3,000 crore (Rs 30 billion) during the last one.

"At current rates, money is likely to last another week or so, though nobody expected the FIIs to keep selling for so long," he adds.

As for the FIIs, it has been a profitable exit for them. While the average value of the BSE Sensex - a direct derivative of prices of 30 front-line stocks - was around 10,535 when the last net inflows of Rs 15,500 crore (Rs 155 billion) came into the country, it hovered significantly higher at around 11,780 when the same amount was withdrawn over the past 33 days.

As a result, even the last entrants could still make a return of around 11.8 per cent in around 50 days.

Sensex Rise and Fall: Complete Coverage