Forex reserves slip to $596.458 bln
India’s foreign exchange reserves extended downtrend for the second consecutive week ending June 10, 2022. RBI’s data on Friday sIn the week ending June 10, India’s forex reserves stood at $596.458 billion – declining by $4.599 billion compared to reserves of $601.057 billion in the previous week. All components in the reserves witnessed a drop in the week under review.
Forex reserves had dropped by $306 million in the week ending June 3, while the reserves recorded a rise of $3.854 billion in the week ending May 27 this year.
The foreign currency assets are the major component of the forex reserves. Gold reserves tumbled by merely $1 million to $40.842 billion, while Special Drawing Rights (SDR) plunged by $23 million to $18.388 billion compared to the previous week. Meanwhile, the reserve position in IMF dived by $40 million to $18.388 billion in the week ending June 10 against the previous week.
So far in 2022, foreign portfolio investors have pulled out a whopping Rs1,98,585 from the equities market, as per NSDL data. The overall outflow (including equities, debt, debt-VRR and hybrid market) stood at ?2,08,587 crore in India.
Trend : Rupee heading towards 80
The rupee is vulnerable as fear of recession escalated amidst soaring multi-year high inflation and aggressive monetary policy tightening on a global level.Yes Bank’s ecologue report dated on June 13 said, stated that Indian rupee could edge closer to 80 by end of March 2023
Last week , On Friday, the rupee closed at 78.05 advancing by 5 paise against the dollar index at the interbank forex market amidst subdued demand in domestic equities, persistent foreign funds outflow, a strong greenback, and higher crude oil prices.
The Indian currency opened strong at 78.03 per dollar and even touched an intraday high and low of 78.02 and 78.10 against the American currency. Even as a tighter monetary policy will provide some support, we expect USD/INR to remain on a depreciating path and weaken to 79.50 by end-FY23.
Another expert, Vinod Nair, Head of Research at Geojit Financial Services said, “Rising inflation and policy tightening by global central banks are forcing the market to discount the possibilities of recession. With central banks’ policy tone pointing towards continued rate hikes of higher magnitude, we can expect FIIs to maintain their selling spree.
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