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Foreign exchange reserves touch new highs of $42.83 billion

Foreign exchange reserves touched a record high for the week to May 18, bolstered by rising foreign portfolio investments and inflows from firms, which recently raised capital abroad, traders and analysts said.

Data released by the Reserve Bank of India on Saturday showed reserves rose to $42.829 billion in the week to May 18 from $42.738 billion in the previous week.

India's reserves have been rising steadily since the end of 2000 helped by foreign capital flows and the $5.5 billion raised from expatriate Indians through the Millennium Deposit Scheme last November.

Analysts said the rise also reflected higher repatriation of earnings by exporters.

The RBI has been mopping up these supplies from the currency market to add to the country's foreign currency assets, they said.

Recently, drugmaker Dr Reddy's Laboratories raised $115.5 million while Satyam Computer Services raised $161.9 million through issue of American Depository Shares.

Currency traders said while a part of these funds had already been brought into the country, the remainder were likely to come in soon.

Traders said foreign funds continued to be bullish about India, despite a cut in India's weightage by the Morgan Stanley Capital International.

"Foreign portfolio inflows continue to be robust, despite the sharp fall in India's weightage on the MSCI index," a dealer in a foreign bank said.

"This should help forex reserves rise a bit more," he said.

MSCI last Saturday unveiled a provisional series of indices where India's weighting fell to around four per cent from seven per cent.

Fund managers said the cut would have a marginal bearing on foreign portfolio flows since most of them were buying shares on their individual merit rather than on sector-wide or macro economic basis.

Foreign institutional investors have poured in over $2.28 billion in Indian stocks and bonds so far this year compared to $ 1.56 billion in calendar 2000.

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