The accuracy of streamflow forecasts is important for efficient monitoring and mitigation of flood events. Unfortunately, the uncertainty in the model control variable which includes model parameters, initial and boundary conditions, propagates through the model, resulting in the degradation of streamflow forecast. Various studies in the past have shown the potential of soil moisture assimilation in hydrological models resulting in the improved forecast. Further, the efficiency of assimilation is based on the number and the distribution of observations used. This study proposes a new approach called Forward sensitivity method (FSM), which operates in two phases. By running the model and forecast sensitivity dynamics forward in time, the first phase places the observations at or near where the square of the forecast sensitivity with respect to the control takes maximum values. Then using only this subset of observations, the second phase estimates the unknown elements of the control by solving a resulting weighted least squares problem. The power of this approach is demonstrated by assimilating ASCAT soil moisture observations into a conceptual Two Parameter Model in a medium sized watershed lying in the Krishna River Basin, India. The model run extends for four monsoon years from June 2007 to June 2011 and two assimilation scenarios were tested. The first scenario uses all the observations, whereas, the second uses only sensitive observations during assimilation and the results were then compared against open loop simulation (model run without assimilation). Sensitivity results indicate that observations during monsoon time alone are sufficient for assimilation purpose, which accounts for only 37.42 percent of total observations. Also, the estimation and forecast results show improved streamflow performance when using only sensitive observations. From the results, it is concluded that FSM based assimilation can help in reducing the computation time greatly. Further, this study will be critically helpful in the places where data availability remains a major problem.