Strengthening dollar, crude oil and commodity prices, coupled with a downfall in foreign investors’ sentiment, has led to a slowdown in the growth of India’s foreign exchange reserves.
According to data furnished by the Reserve Bank of India (RBI) in its weekly statistical supplement, India’s foreign exchange reserves grew by only $239.4 million and stood at $352.71 billion in the week ended June 5, 2015.
The reserves had grown by $917.5 million in the week before to $352.47 billion. For the week ended May 22, 2015, the foreign exchange reserves had fallen by $2.31 billion to $351.55 billion after four successive weeks of gains.
The country’s foreign exchange reserves had touched a record high of $353.87 billion for the week ended May 15 having increased by $1.74 billion over the previous week.
Foreign exchange reserves have increased by close to $30 billion since January as overseas investors, buoyed by the hope of economic revival, poured in dollars in the local debt and equities markets.
“The slowdown in the reserves is due to the dollar rallying and the rupee falling. Though the reserve bank is closely monitoring the situation, so that the rupee does not goes into a free fall, global cues are adding to the volatility,” Anindya Banerjee, senior manager for currency derivatives with Kotak Securities told IANS.
“The hawkish language used by the Reserve Bank in its monetary policy review on June 2 and the less-than-expected cut in the key lending rates also subdued the foreign investors’ sentiments,” Banerjee said.
According to Banerjee, in the last 6 weeks the FPIs (Foreign Portfolio Investors) have sold stocks worth nearly $3 billion. They had picked-up scrip worth $2.4 billion in April.