Portfolio inflows to boost India's forex reserves further: Experts

MUMBAI: Healthy portfolio as well as general FDI capital inflows are expected to further boost India's foreign exchange reserves in the coming weeks. Accordingly, the portfolio equity capital is attracted to India on the prospects of faster economic recovery.

Lately, issuance of green and AT1 bonds by India's corporate as well as banking sector along with FDI flows in general have led to a healthy accrual of forex reserves. "Healthy portfolio as well as non-portfolio inflows can led to further rise in reseves," Emkay Global Financial Services' Lead Economist Madhavi Arora said.

"The reason is optimism over India's accelerated economic recovery and no signs of tapering in the US. This trend is expected to continue." Consequently, India's stock markets attracted over Rs 6,000 crore in just few sessions last week. The inflow led to a stronger rupee as well as booming equity indices.

"Acuite believes that India's forex reserves have adequate cushion to handle the currency volatility that can arise during a possible taper down of the bond purchases by the developed economies over the next one year," said Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research.

"Besides, reserves may remain stable and even further rise on the back of continuing inflows from bonds and general FDI."

Last week, an exponential rise in India's 'Special Drawing Rights' allocation aided in the accural of over $16.663 billion into India's foreign exchange reserves during the week ended August 27.

In financial parlance, SDRs are international reserve assets which are created by the International Monetary Fund (IMF) and are periodically allocated to its members in proportion to their quotas.

The SDR balances are equivalent to liquid balances in convertible currencies in almost every aspect.

The Reserve Bank of India's (RBI) forex reserves increased to $633.558 billion from $616.895 billion reported for the week ended August 20. (IANS)

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