Narendra Modi Mania: India Most Loved Equity Market in Asia

India has, so far this year, received the lion's share of foreign investor interest in Asian equities outside Japan, according to a report.

Foreign institutional investors pumped $18.8bn (£11.2bn, €13.8bn) in Asian equities between 1 January and 26 May, of which $7.8bn found its way into the Indian markets, according to a HSBC report.

By comparison, investors poured $6.3bn into Taiwanese markets and $3.6bn into the Indonesian markets.

The Philippines and Korea received $1bn and $0.9bn respectively.

However, foreign investors sold Thai equities amid political turbulence in the Southeast Asian nation.

FII flows into emerging market economies in 2014 are likely to be much better than what they were in 2013. These economies have this year already received 78% of the inflows in 2013, HSBC added.

Modi Mania

In India, overseas investors are betting that Prime Minister Narendra Modi's pro-business regime can revive growth, which is hovering near the decade-low of 4.5% clocked in the financial year 2012-13.

Standard Chartered said in a note to clients: "Near-term economic releases and policy events [in India] may not bring major surprises for the market, but they might underline the problems of the here-and-now rather than the promise of what may be a better future."

"[30 May] brings the final GDP report of FY14; y/y growth for the final quarter of the year, and for F Y14 as a whole, will likely come in at 4.7%.

"India's GDP growth trajectory has formed a long, flat trough, staying in a low and narrow range of 4.4-4.8% for seven consecutive quarters. The GDP report is unlikely to signal an early exit."

Standard Chartered said in a separate note: "USD-INR range-trading has been mirrored in the domestic debt market, with the benchmark 10Y IGB yield consolidating between 8.60% and 8.70%. With policy rates likely to remain unchanged, and given two-way risks around the new FY15 fiscal deficit target, we think duration gains will be limited near-term.

"However, we expect FII interest to be extended over time, and maintain a Positive outlook on IGBs. RBI intervention in the FX market may have increased the danger of corrective INR weakening, but we still think benchmark 10Y IGB yields can drop to 8.50% once positive domestic triggers emerge."