For the week to March 28, the reserves rose by whopping $5.038 billion to $303.673 billion, the second highest in the 2013-14 fiscal. Foreign currency assets also jumped by $5.011 billion to $276.406 billion.
A state-run bank's treasury head attributed the rise in the forex kitty to the massive jump in FII funds flows into the equities market, which has risen to life-time highs in March on expectations of a new, dynamic government next month following the 9-phase general elections, starting tomorrow.
The current government has been hit by allegations of various scams, with industry often accusing it of sliding into policy paralysis mode and not pushing economic reforms.
Singapore brokerage DBS in a report said: "Absorption of inflows that followed RBI's concessional swap arrangement for banks and non-resident deposits coupled with strong FII interests in equities and debt have added to the reserves."
From October, RBI became net purchaser of dollars on monthly basis. It net bought $10.08 billion in November, as per RBI data.
Strong interest from FIIs into equity market also led to the addition of forex reserves. Towards the year end, FIIs interest increased leading equity markets to lifetime highs.
During the April-March period, FIIs have pumped in net amount of Rs 79,709 crore in the equity market. This was the fifth consecutive fiscal year inflows by overseas investors after pulling out a net amount of Rs 47,706 crore from the share market in 2008-09.
The government selling a part of its stake in Axis Bank for over a $1 billion also helped boost the inflows as FIIs lapped up the stock.
In the week ended December 23, 2011, the reserves had stood at $300.86 billion. It remained over $300 billion for major part of 2011 and the highest ever was in the week ended September 2, 2011 when it stood at $320.78 billion.
Forex reserves began the year with a rise of near $2 billion at $293.843 billion in the week ended April 5.