The Reserve Bank of India (RBI) announced that India’s foreign exchange reserves surged by $140 million to reach a record high of $642.631 billion as of March 22. This marks the fifth consecutive week of substantial growth in the country’s overall reserves.
The previous week also witnessed a significant increase, with reserves rising by $6.396 billion to reach $642.492 billion. The surge in reserves is attributed to higher Foreign Portfolio Investor (FPI) flows, reflecting growing foreign investor confidence in Indian markets.
Commenting on the FPI flows in FY24, Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated, “The resilience of the Indian stock market and the improving macros of the Indian economy forced the FPIs to turn buyers in India.” He highlighted FPIs’ investments in various sectors and noted steady inflows into debt.
Alok Agarwal, Head Quant & Portfolio Manager at Alchemy Capital Management, emphasized that robust FPI inflows indicate continued foreign investor confidence. He also noted the increasing participation of retail investors in the Indian stock market, which has helped offset the impact of FPI outflows.
India’s foreign reserves have reached significant milestones in recent times, with a peak in September 2021 at $642.453 billion. Despite occasional setbacks due to interventions by the central bank to stabilize the rupee, the reserves have steadily grown.
In the week ending March 22, foreign currency assets, a crucial component of reserves, saw a slight decline to $568.264 billion, while gold reserves surged to $51.487 billion. Special Drawing Rights (SDRs) and reserve position with the IMF experienced minor fluctuations.
The RBI continues to intervene in the market to manage liquidity and prevent significant rupee depreciation, often through selling dollars. Overall, India’s robust foreign exchange reserves reflect its strong economic fundamentals and investor confidence in the Indian market.
