MUMBAI: Depreciation in dollar value and smart investment moves by the country's apex bank led India's foreign exchange reserves to rocket by $7.26 billion and touch a new record high of $351.86 billion.
According to the data furnished by the Reserve Bank of India (RBI) in its weekly statistical supplement, India's total foreign exchange reserves touched a new record high of $351.86 billion for the week ended May 1, 2015.
The new record surpasses the previous high of $344.6 billion touched during the week ended April 24, when the reserves grew by $1.4 billion.
Foreign exchange reserves have increased by close to $25 billion since January as overseas investors buoyed by the hope of economic revival poured in dollars in the local debt and equities market.
According to analysts, the massive rise in reserves was mainly on account of a $6.88 billion jump in the foreign currency assets (FCAs) which stood at $327.15 billion in the week under review.
"The jump in the reserves is a mix of several positive reasons, like depreciation of dollar which translated into a rise in non-dollar currencies and gold value.
It is also assumed that the RBI has received the interest payment on securities it holds in non-dollar currencies," Anindya Banerjee, senior manager for currency derivatives with Kotak Securities told IANS.
"The RBI is also pretty active in the forward purchase markets since the last 18-23 months and this could also have resulted in the exponential rise in the foreign reserves," Banerjee added.
According to Banerjee the RBI is building up the reserves to counter any future financial shocks like the one which was witnessed in June 2013.
"Apart from dealing with any future financial shocks like the one which was earlier triggered by the US Fed's announcement of tapering, the healthy state of reserves will also act as a support to the Indian rupee's value," Banerjee added.
The RBI is cautious about the US Fed's stand that the rate hike might take place in the later part of the year.
With higher interest rates in the US, the foreign portfolio investors (FPIs) are expected to be led away from the emerging markets such as India.
The US Fed had earlier dropped an assurance to be "patient" in raising interest rates and signalled the hike could come by mid to late this year.
The country's gold reserves augmented by $297.7 million and stood at $19.33 billion in the week ended May 1.
The special drawing rights (SDRs) were up by $57.6 million to $4.06 billion, while the country's reserve position with the International Monetary Fund (IMF) went up by $18.7 million at $1.31 billion.