A strengthening rupee, buoyant equity markets coupled with a fall in dollar value boosted India's Forex reserves by $2.26 billion, experts said on Saturday. Overall, the Forex reserves stood at $353.06 billion for the week ended on October 9.
“The increase in Forex reserves can be attributed to an appreciation in rupee value and the weakening of US dollar against the major global currencies like Euro, Pound and Yen,” Anindya Banerjee, Associate Vice-President for Currency Derivatives with Kotak Securities, told IANS.
“It is perceived that the appreciation in rupee value allowed the Reserve Bank of India (RBI) to buy more dollars and keep rupee in a comfortable range,” Banerjee said.
The rupee had closed at 64.74 to a US dollar during the week ended on October 9. The rupee gained 77 paise on a weekly basis from its previous close at 65.51 to a US dollar in the week ended on October 2.
Previously, a rise in the value of gold reserves had added $827.4 million to India's Forex kitty which swelled to $350.80 billion for the week ended on October 2. The reserves had declined by $2.04 billion to $349.97 billion in the week ended on September 25.
Furthermore, the data furnished by the RBI in its weekly statistical supplement showed that the foreign currency assets (FCAs) had gained by $2.22 billion to $329.51 billion in the week under review. The FCA constitutes the largest component of India’s Forex reserves. It consists of US dollars, major non-dollar currencies, securities and bonds bought abroad.
“The dollar in the week under review, had depreciated by close to 1 per cent against major global currencies. This added around $1 billion to the FCA,” Banerjee said.
The Indian reserves consist of nearly 20-25 per cent of non-dollar currencies. The individual movements of these currencies against the dollar impacts the overall reserve value. Besides, currency movements, increased inflows into the equity markets supported the Forex's upwards trajectory.
During the week ended on October 9, the barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), rose 858.56 points or 3.17 per cent to 27,079.51 points.
The wider 50-scrip Nifty of the National Stock Exchange (NSE) too made gains during the weekly trade ended October 9. It rose 238.8 points or three per cent to 8,189.70 points.
“Rising equity markets, increased inflow of foreign funds and appreciating rupee have had a positive impact on the reserves,” said Hiren Sharma, Senior Vice-President, Currency Advisory at Anand Rathi Financial Services.