India’s forex reserves drop by nearly $8bn

Mumbai, October 11:

India’s foreign exchange reserves dropped $7.87 billion during the week that ended on October 3, due to market interventions by the central bank to stabilise the rupee and selling by foreign funds.

Reserves, which include foreign currency assets and gold, stood at $283.94 billion as on that date, as per latest data with the Reserve Bank of India (RBI).

The fresh data comes against the backdrop of leading industry chambers asking the government to set up a $7-$8 billion fund with reserve money available as foreign exchange to invest in Indian securities and debt markets.

“This fund will ultimately make a profit as Indian asset prices are likely to increase in the longer term,” the Confederation of Indian Industry (CII) said in a statement. “This will also have the benefit of creating a floor for asset prices and prevent depreciation in the rupee.”

Since the beginning of the current fiscal, foreign exchange reserves are down as much as $25.78 billion taking into account the

actual position and the account the effect of appreciation or depreciation of non-US currencies like Euro, Pound-Sterling and Yen, held in reserves.

One of the main reasons for the depletion can be attributed to the net sales in equity markets by foreign funds, which sold equity worth $883 million during the four days of trading for last week.

The net sales by foreign institutional investors (FIIs) amounted to $932.8 million during the current month and $10.05 billion during the year, says more recent data available with the Securities and Exchange Board of India (SEBI).

There were 1,530 FIIs registered with the watchdog.