Greater global integration and improving macroeconomic fundamentals have placed Indian capital markets on the radar of investors the world over with the net portfolio flows being pegged at a whopping Rs 1,57,500 crore ($35 billion or Rs 1,575 billion) for 2003-06, a study says.

The country's capital markets have experienced sweeping changes since the beginning of the last decade with its market infrastructure advancing and corporate governance progressing even faster than in many other emerging market economies, a Deutsche Bank Research report on India's capital market said.

The global ratings agencies Moodys and Fitch have awarded India investment grade ratings, indicating comparatively low sovereign risks, it said.

These positive dynamics have led to a sustained surge in Indias equity markets since 2003, attracting sizeable capital from foreign investors with net cumulative portfolio flows (bonds and equities) amounting to $35 billion from 2003-2006, it said.

"India boasts a dynamic equity market, the sharp rise in Indias stock markets since 2003 reflects its improving macroeconomic fundamentals," the report said.

However, the large size of insider holdings and the small presence of institutional investors belie these impressive figures.

Interestingly, Indias stock market has outperformed world indices in recent years. Despite its increasing correlation with world markets in recent years, India still offers diversification in global portfolios.