Police believe the audacious raid was carried out by between six and eight suspects who cut a hole in the top of the carriage with a blow torch as the train made its way through from Salem to Chennai.
After passing the money through the roof, police believe the culprits may have jumped off the train.
Officers have been searching the tracks along the route for evidence of the missing money.
"They created a manhole and then they sneaked one after the other and lifted the bundles to the roof before taking them away," said police Inspector General M Ramasubramani, who is leading the investigation.
"We are inquiring with the train guard and the police personnel if they heard any unusual noises on the roof," added police superintendent P Vijayakumar.
It was not until hours after the train reached its destination in the city of Chennai that the money was discovered missing from the carriage, which held a total of 3.4 billion rupees ($51m).
The gang may have hidden themselves in the carriage before it was locked ahead of its journey on Monday night, police believe.
The audacious crime has echoes of the Great Train Robbery of 1963 when a gang of criminals in Britain stopped an overnight post train and made off with £2.6m. Sky News
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