Foreign institutional investors have been bullish on Indian shares for much of 2021 so far, net offloading only in April, May and July. As of Monday, FIIs have invested a net Rs 64,202 crore or $8.9 billion in Indian equities so far this year. That is more than double than the net purchases of Rs 28,347 crore ($3.4 billion) in the first nine months of 2020.

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Out of the total net buys in 2021 so far, FII inflow of Rs 13,083.2 crore ($1.8 billion) was in the current month alone.

FIIs are on track to complete a third straight year as net buyers of Indian equities. In 2020, their net buys had stood at Rs 1.7 lakh crore ($23 billion).

In the previous year, net FII inflow had come in at Rs 1 lakh crore ($14.4 billion). In 2018, they had net offloaded Indian shares worth Rs 33,014 crore ($4.4 billion).

FII inflow is one of the key reasons behind the Indian market's resilience to global turmoils in the recent past. Analysts say a strong economic recovery and easing concerns about coronavirus infections cements India's position as a preferred investment destination for FIIs.

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"India has been showing strong resilience for the past many days with key indices outperforming global peers. The Indian economy is showing a strong recovery and concerns about Covid cases are easing, which makes India look like a safer bet for foreign investors amid concerns in other emerging markets," Santosh Meena, Head of Research at Swastika Investmart, told CNBCTV18.com.

He, however, warned that volatility may continue in the Indian as well as global markets ahead of the US central bank's policy meeting.

On Tuesday, Sensex and Nifty50 surged around one percent each to nearly recover all of their previous day's losses. That while fears of contagion as China's troubled property developer Evergrande stares at a debt obligation deadline spooked global markets.

Evergrande Group is due to meet some payment obligations relating to interest on bonds this week. It has been scrambling to raise funds to pay back many of its lenders, suppliers and investors.

Investors the world over await updates from central bank meetings due this week for cues on the timing of potential tapering of massive stimuli. Commentaries on tightening of monetary policy will also be watched closely.

Meena believes the next few days are going to be critical for global markets.

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"There is fear that the Fed may talk about the timeline of tapering which could be as earlier as November. If the dollar index and US bond yields, which are showing signs of upside momentum, continue to rise, there could be a risk of FII selling in the near term in Indian equities," he said.

(Edited by : Aditi Gautam)