Mumbai: India’s forex reserves took a big hit because of successive sharp interest rate hikes in the US, which depreciated the value of the bonds held
Foreign investors have brought a net $16 billion in Indian equities in the last three months, data from NSDL showed, allowing the central bank to buy from the market and build on reserves. The current level of reserves is enough to cover 11 months of imports, up from 9.3 months in December 2022 and 8.9 months in September 2022.
Although the government has been promoting international trade in the rupee, maintaining adequate reserves continues to be a strategic objective of the RBI, given that most imports are dollar-denominated.
The rupee ended at 81.94 on Friday, up 0.1% for the week. “Since October 2022, the RBI has been rebuilding its reserves, taking advantage of rupee’s recovery when it appreciates beyond 82 levels,” said Care Edge Ratings in a report. Positive capital flows are currently supporting the rupee.
“Capital flows have sustained its positive momentum for the fifth straight month in July, with the equity segment accounting for most of the inflows. Low currency and bond volatility, positive real rates and improving growth prospects have supported overseas demand,” said Care Ratings.
m.timesofindia.com