An RBI release said that the reserves rose by $ 315 million in the week ended March 19. The rise in forex reserves is mainly on account of a rise in the foreign curency assets which crossed the $ 28 billion mark to reach a record level of $ 28.25 billion.

Analysts said that the rise can be attributed to the increased flow of funds from the foreign institutional investors (FIIs). The FIIs have been increasing their exposure in the stock market after finance minister Yashwant Sinha presented a market-friendly budget which included sops to mutual funds and exemption of long-term capital gains tax. The budget also proposed to kickstart the economy by offering various sops to the housing sector.

The FIIs have adopted a positive outlook on the Indian economy against thebackdrop of parliamant passing the Patents Bill and the cabinet clearing the Insurance Regulatory Bill which allows 26 per cent foreign stake in insurance companies.

The Reserve Bank release said that the since August 20 last year--when it had announced certain measures to stabilise the forex markets--the forex reserves have increased by over $ 4 billion. The foreign curency reserves have increased from $ 26.97 billion on August 21, 1998, to $ 31.23 billion on March 19 this year, thus showing an increase of $ 4.26 billion.

During the same period, the foreign currency assets (exclusing gold and SDRs) have increased by $ 4.32 billion from $ 23.93 billion to $ 28.25 billion.

"The forex reserves have been bolstered because of the stiff measures in the forex market imposed last year. Now that the reserves have scaled a new height, the RBI should rollback the measures," a forex dealer said. However, the Reserve Bank is unlikely to do away with the measures in the immediate future.