India's foreign exchange reserves broke a two-week free-fall to rise $1 billion to $119.34 billion in the week to August 6, mainly on revaluation gains booked due to dollar weakness overseas, analysts said.
A stronger euro and sterling, which rose about 2 percent and 1 percent respectively against the dollar during that week, contributed to the rise in the reserves amid ebbing foreign capital inflows, they said.
The Reserve Bank of India (RBI) said the foreign currency assets expressed in US dollar terms included the effect of appreciation or depreciation of other currencies held in its reserves such as the euro, sterling and yen.
"A bulk of the rise in the reserves was due to revaluation gains," said A Prasanna, analyst at ICICI Securities, Bombay. "The rest of it seems to be foreign investment inflows which have been slowing."
Foreign funds have been paring exposures to Indian assets in the past few months after a new left-backed government took power in New Delhi in May and on signs of a global monetary tightening cycle.
After pumping in an average of more than $1 billion a month into Indian assets in the first 4 months of this year, foreign funds were net sellers of nearly $800 million in May and made only relatively small purchases in the next two months.
In the first few days of August, their net investment totalled just $7.7 million, data from the capital market regulator showed.
The thinning foreign funds inflows and spike in crude oil, India's biggest import item, has seen the rupee lose nearly 6 percent.
Since it struck a 51-month high of 43.545/550 in early April forcing the central bank to step in to curb a sharp fall in the local currency.
The partially convertible rupee ended Friday at 46.3050/3150 per dollar, weaker than the previous close of 46.1900/2050 with the central bank intervening intermittently to check a sharp slide. The steady intervention has seen reserves dipping from a record high.
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