Foreign investors poured nearly $3 billion into India's stock market in a week

India's stock market is drawing back foreign investors after a massive sell-off, with foreign money buying local stocks in the week ending December 6 at nearly $3 billion, the highest level since June.

According to data compiled by Bloomberg, the Indian stock market experienced massive selling activity eight weeks ago, with as much as $14 billion sold. This is mainly due to the earnings of local companies falling short of expectations and high valuations.

However, the Indian stock market has attracted foreign investors back in the past two weeks amid renewed optimism about interest rate cuts. The Reserve Bank of India (RBI) cut its cash reserve ratio on Friday, a move interpreted by markets as paving the way for a cut in interest rates. That pushed India's stock index up more than 2 percent last week, its best weekly performance since June.