India's forex reserves decline for fourth consecutive week to $640B
What's the story
India's foreign exchange (forex) reserves declined for the fourth consecutive week, slipping to $640.28 billion in the week ending December 27, 2024, according to data from the Reserve Bank of India (RBI).
This marks the lowest level since April 19 last year.
The country's forex reserves declined by $4.11 billion over the previous reporting week and had slipped by $8.48 billion to $644.39 billion in the week ending December 20.
Market dynamics
RBI's intervention in currency market influences forex reserves
The fall in India's forex reserves can be mainly attributed to the RBI's aggressive intervention in the currency market. The move was aimed at propping the rupee against a strong US dollar.
The central bank regularly sells dollars from its reserves when the local currency is under pressure, to prevent excessive volatility.
On Friday, the Indian rupee (INR) fell two paise to close at ₹85.78 against the US dollar after opening five paise weaker at ₹85.80 against the greenback.
Market activity
Rupee's performance and foreign portfolio investors' activity
The INR has been declining for the past nine weeks, closing the week ending December 27 at ₹85.75 against its American counterpart.
It is expected to trade between ₹83.20-₹87.00 against the US dollar in 2025.
Meanwhile, foreign portfolio investors (FPIs) have renewed interest in Indian bonds and equities by pumping ₹29,240 crore into the market after pulling out ₹21,444 crore in November.
Investment trends
FPIs's investment trends and impact on forex reserves
Throughout 2024, overseas investors have largely remained net sellers, having sold stocks worth ₹7,292.3 crore according to NSDL data compiled by NDTV Profit.
For the week ending December 27, foreign currency assets—a major component of the reserves—dropped to $551.9 billion according to RBI data.
These assets factor in the impact of appreciation/depreciation of non-US units like euro, pound and yen held in forex reserves.
Gold reserves also declined during this period, dropping to $66.26 billion.