India's foreign exchange reserves rose to a record $117.59 billion in the week ended April 16 as the central bank continued to mop up a bulk of the overseas capital flowing into the country, analysts said.
Data from the central bank, showed India's foreign exchange reserves rose by $1.53 billion from $116.06 billion in the week ended April 9.
The weekly rise was however less than half the previous week's $3.37 billion increase which was one of the highest weekly gains.
The pace of the reserve build-up in recent weeks has made Asia's sixth-largest pile of reserves one of the fastest growing as well, having risen 16.9 percent so far in 2004.
The Reserve Bank of India (RBI) said the foreign currency assets expressed in US dollar terms included the effect of appreciation/depreciation of other currencies held in its reserves such as the euro, pound sterling and yen.
Analysts said the rapid reserve accumulation largely reflects the central bank's determination to stem sharp gains by the local currency against the dollar, which has rebounded overseas in recent sessions, to protect export competitiveness.
"The reserves growth continues to reflect the currency management measures being undertaken by the central bank in the face of strong capital flows into the economy," said Siddharth Mathur, strategist at JP Morgan Chase, Bombay.
"And given that this has happened in the backdrop of the dollar's appreciation versus the euro and other majors means that in real terms the accretion should have been slightly higher."
Analysts said overseas funds appeared unperturbed by the country's massive general election, which began on April 20 and ends on May 10 and continued to pour money into local assets.
Their net purchases of shares and debt so far in 2004 total $4.4 billion, already more than half the $7.7 billion they invested in 2003.
"With the elections going on, one would have expected foreign capital flows to somewhat ease this month.
But that does not appear to be happening," said Sumatra Chaudhuri, economic adviser at Indian credit rating agency, ICRA.
Analysts said the fact that the Reserve Bank of India had armed itself with new stabilisation bonds to offset the effects of its currency market intervention in the new fiscal year from April 1, was likely a key factor in its stepped up interventions.
The central bank can now tap into securities of up to 600 billion rupees ($13.6 billion) to drain the rupee funds it injects into the banking system every time it buys dollars.
The Indian central bank, which has been grappling with steady foreign capital inflows in the past two years, had almost run out of rupee assets towards the latter half of March, when it briefly loosened its grip on the local currency.
That sparked a rupee rally that took the unit to a 51-month closing high of 43.5450/5500 per dollar on April 7, before the Reserve Bank of India reasserted its grip on the currency market.
The rupee ended on Friday at 44.0350/0450 per dollar, taking its losses over the past two weeks to nearly one percent.
The local currency is, however, still 3.5 percent firmer against the dollar in 2004, as foreign capital surges into the Indian economy, which is estimated to have grown by 8.1 percent in the financial year to March 2004.
Asia's third-largest economy is forecast to expand by more than six percent in the current fiscal on expectations of a second year of good monsoon rains in the farm-dependent economy.
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