On Thursday, a day after the Fed announced its decision to taper its QE3 programme, foreign funds net bought equities in the cash market to the tune of Rs 2264 crores.

In fact, this is the highest level bought by foreign funds in recent times and shows that QE3 tapering by the Fed had little impact on their buying and selling decisions.

On Thursday the Fed announced a reduction of $10 billion in its asset purchase programme, more popularly known as QE3. It decided to reduce its purchases from $85 billion to $75 billion. A reduction in these asset purchases worries stock markets around the world, as liquidity is reduced and sucking out liquidity from the system is always bad news for equities.

Foreign funds have bought aggressively in the Indian markets and this year their investment has crossed the Rs 1 lakh crore mark, as they continue to chase Indian equities.

Since FIIs were permitted to buy Indian equities, their net inflows have crosses Rs 1 lakh crore mark only in 2010 and 2012. The year 2012 still remains a record wherein FIIs had a net inflow of Rs 1,33,268 crore.

In fact, they continue to be buyers in select high cap stocks from the IT and pharma sector. This has pushed the indices to record levels in 2013. Domestic institutions on the other hand have been consistently selling stocks. There is a likelihood that they may continue to do so, given the government's aggressive divestment plans, which is generally subscribed to by domestic institutions.

Domestic institutions it is learnt have started buying into select beaten down sectors like banks and infra, while foreign funds prefer the pharma and IT space.

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