(Bloomberg) -- Foreign funds are returning to the Indian stock market after a massive selloff, amid growing optimism over interest-rate cuts.

Overseas investors bought almost $3 billion of Indian shares on net basis during the week through Dec. 6, the highest since June last year, according to data compiled by Bloomberg. That was a second straight week of buying, after a $14 billion selloff in the preceding eight weeks.

The inflows helped Indian stocks post their best weekly gain since June as the benchmark Nifty index rose more than 2% last week. The move coincided with the Reserve Bank of India cutting the cash reserve ratio on Friday, which markets interpreted as a precursor to interest-rate cuts in the next policy. Positive seasonality around the year-end also favors the bulls.

Earlier, foreign outflows pushed key gauges by more than 10% from their peak levels to enter the so-called correction territory in November. Disappointing corporate earnings and higher valuations contributed to the selloff.