India's foreign currency assets soar ₹5.7L crore: What's driving rally?
India's foreign currency assets (FCA) have seen a significant surge, since the announcement of Indian bond inclusion in JP Morgan's global bond index. Data from the Reserve Bank of India (RBI) reveals that as of July 12, 2024, FCA stood at ₹48,90,773 crore, a substantial increase from ₹43,28,124 crore as of September 29, 2023. The total forex reserves also reached a record high for week ending July 12 at ₹55,70,621 crore.
Increased interest in Indian market
JP Morgan's announcement to include Indian bonds in its global bond index has sparked significant interest among foreign investors, leading to a rise in the holding of Indian bonds by these entities under Fully Accessible Route (FAR) securities. FAR securities allow non-residents to invest in specified Government of India-dated securities without any investment ceiling. As of July 20, foreign investors' holdings in FAR securities stood at ₹1.98 lakh crore, marking an increase of over ₹1 lakh crore since the announcement.
Indian government bonds were added this June
On September 22, 2023, JPMorgan announced that it would add Indian government bonds to its benchmark emerging-market index with a maximum weightage of 10%. The bonds were officially added to the index on June 28, 2024. This inclusion has played a significant role in attracting foreign investors and boosting India's foreign currency assets. However, it's important to note that these assets are subject to volatility, based on factors such as currency movement and geopolitical tensions.
