Thank low oil prices, high FII inflows: India's forex kitty at a record $322 bn

Mumbai - After a gap of four years, India’s foreign exchange reserves touched a new lifetime high at $322.135 billion for the week ended January 16, driven by higher inflows and lower outgo of forex on account of a big slump in global crude prices. The reserves jumped by $2.66 billion to reach $322.135 billion during the week, the Reserve Bank data showed yesterday. The forex kitty for the first time had crossed $320 -billion mark ($320.79 billion) for the week ended 2 September 2011. [caption id=“attachment_2062217” align=“alignleft” width=“380”]  AFP[/caption] “Strong FII inflows and reduction in import burden due to a record fall in oil prices have led to accumulation of the reserves,” Harihar Krishnamoorthy, Treasury Head at FirstRand Bank, told PTI. Overseas investors have pumped in $3,442.29 million into Indian market markets in this month so far, according to the data given by Central Depository Services. “Dollar selling from exporters in the market has contributed towards higher forex reserves,” said a chief dealer with a state-owned bank. Analysts also attributed the rise in the reserves to the likely buying of dollars by the RBI. The RBI has been net purchaser of dollars for the most part of the current fiscal. Last November, the apex bank net purchased $3,081 million worth of the greenback from the spot market while in October the figure stood at $2,703 million. The foreign currency assets (FCAs), a major constituent of overall reserves, jumped $2.685 billion to $297.53 billion in the reporting week, the data showed. FCAs, expressed in dollar terms, include the effect of appreciation and depreciation of non-US currencies such as the euro, pound and yen, held in reserves. Foreign brokerage Bank of America-Merrill Lynch said in a report today that it expects the forex reserves to reach 10 months’ import cover by March 2016, which currently is at about eight months. Ever since the Narendra Modi government came to power in May-end, foreign funds had been pumping more and more dollars into Indian equities. In 2014, FIIs pumped in $16.15 billion into Indian equities while they have exhausted the cap of $30 billion in Government Securities. They have parked $32.5 billion in corporate bonds, which is 64 percent of their cap of $51 billion. The Bank of America-Merrill Lynch said the European Central Bank’s massive bond stimulus programme announced yesterday could further boost foreign flows into emerging markets like India this year, thus offsetting the possible outflow on account of the US tapering. The American brokerage has estimated India could attract $25 billion in portfolio equity flows from the ECB action. On the rupee side, the rising forex reserves had the Indian unit becoming the best performing Asian currency throughout last year. So far this year, the domestic currency has gained around 2.6 percent against the US dollar. PTI