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Foreign investors have turned bullish on the outlook for Indian stocks, seeing further gains after victories in key state elections by Prime Minister Narendra Modi’s party helped drive the market to a $4 trillion valuation.

Overseas funds held 31,549 more long index futures contracts than short contracts as of Thursday, turning to a net bullish position a day earlier for the first time since September, according to exchange data compiled by Bloomberg.

Stocks extended gains to fresh record highs this week, as the local election results are seen diminishing risk of political upheaval in national polls next year. The NSE Nifty 50 Index is up 16% so far this year, outperforming most Asian peers as investors bet on strong earnings growth and improvement in domestic consumption as well as the likelihood of Modi winning a third term.

Watch: India Stock Market Value Tops $4 Trillion for First Time (Video)

Common futures trades by overseas investors target the Nifty 50 and Nifty Bank Index, among others. While now net long index futures, global funds also have turned buyers of Indian stocks in the cash market again, purchasing over $4 billion from the end of October through December 5 on a net basis.

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“This shows that foreign investors are getting confident on India, especially, because of political stability,” which has improved after the state elections, said Chandan Taparia, head of derivative and technical research at Motilal Oswal Financial Services Ltd. “The rally should extend further with Nifty likely headed to 21,500,” he said.

The shift in the positioning of overseas funds in index futures bodes well for India’s record rally. Historically backtested data show that in the last decade, whenever the net index futures positioning of foreign investors has turned positive, the Nifty 50 has risen 2.6% on average over the next 30 days, 79% of the time. 

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