Portfolio entries to increase foreign exchange reserves and the Indian rupee in the coming week

Healthy portfolio as well as general FDI [foreign direct investment] capital inflows are expected to further increase India’s foreign exchange reserves and the rupee over the coming week.
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Mumbai: healthy portfolio as well as general FDI [foreign direct investment] capital inflows are expected to further increase India’s foreign exchange reserves in the coming weeks.

As a result, portfolio equity is attracted to India with the prospect of a faster economic recovery.

Recently, issuance of green bonds and AT1 [also called perpetual bonds, carry no maturity date but have a call option] by Indian businesses and banking sector as well as FDI inflows in general have led to a healthy accumulation of foreign exchange reserves

Rising foreign exchange reserves are expected to keep the rupee strong against the dollar over the coming week, reflecting the declining exchange rate of the rupee against the UAE dirham.

“A healthy portfolio as well as non-portfolio inflows can lead to a further increase in reserves,” said Madhavi Arora, chief economist at Emkay Global Financial Services.

“The reason is optimism about India’s accelerated economic recovery and no signs of slowing down in the United States. This trend is expected to continue.

As a result, Indian stock markets attracted over Rs 60 billion in just a few sessions last week.

The influx led to a stronger rupee as well as booming stock indices.

“India’s foreign exchange reserves have an adequate cushion to manage currency volatility that may arise from a possible decline in bond purchases by developed economies over the next year,” Suman said. Chowdhury, analytical director of Acuite Ratings & Research.

“In addition, reserves could remain stable and increase further thanks to the continued flows of bonds and FDI in general.”

Last week, an exponential increase in India’s “Special Drawing Rights” allocation helped build up over $ 16.663 billion in India’s foreign exchange reserves during the week ended. August 27.

In financial jargon, SDRs are international reserve assets that are created by the International Monetary Fund (IMF) and are periodically allocated to its members in proportion to their quotas.

Balances in SDRs are equivalent to liquid balances in convertible currencies in almost all respects.

Reserve Bank of India (RBI) foreign exchange reserves rose to $ 633.558 billion, from $ 616.895 billion for the week ended August 20.

Earlier, the RBI said the IMF allocated SDR 12.57 billion, which is equivalent to around $ 17.86 billion at the last exchange rate to India on August 23, 2021.

“India’s total holdings of SDRs now stand at SDR 13.66 billion (equivalent to about $ 19.41 billion at the latest exchange rate) as of August 23, 2021.”

According to the RBI Weekly Statistical Supplement, India’s foreign exchange reserves include foreign exchange assets (FCA), gold reserves, special drawing rights (SDRs) and the country’s reserve position with the Fund. international monetary policy (IMF).

However, on a weekly basis, the FCAs, the largest component of foreign exchange reserves, declined slightly from $ 1.409 billion to $ 571.600 billion.

On the other hand, the value of the country’s gold reserves increased by $ 192 million to reach $ 37.441 billion.

Likewise, the value of the SDR has increased. It increased by $ 17.866 billion to reach $ 19.407 billion.

In addition, the country’s reserve position with the IMF increased by $ 14 million to $ 5.110 billion.

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