FIIs and NRI funds boost forex kitty

The surge in foreign funds flowing into into equities coupled with record NRI funds and dollar purchases by the Reserve Bank of India (RBI) has boosted the foreign exchange reserves to over $300-billionmark at the end of March, which is the highest since December 2011.

The latest RBI figures for the week to March 28 show that foreign reserves jumped by $5.038 billion to $303.673 billion, the second highest in the 2013- 14 fiscal. The robust flow of dollars into the country has strengthened the rupee, which breached the 60- mark for the first time in eight months. RBI had been widely expected to build up its reserves after the country was one of the emerging countries worst hit during intense global market volatility last year because of its record high current account deficit.

The rupee slumped to a record low in late August sparking India's biggest market turmoil since a balance of payments crisis in 1991. RBI had to sell dollars to defend the rupee sending reserves to a more than three- year low in September 2013.

Singapore brokerage DBS in a report said, " Absorption of inflow that followed RBI's concessional swap arrangement for banks and non- resident deposits coupled with strong FII interests in equities and debt have added to the reserves." Official figures show that RBI became a net purchaser of dollars on monthly basis. It net bought $ 10.08 billion in November.

Strong interest from FIIs in equity market also led to the addition of forex reserves.

Towards the year- end, FIIs interest increased leading equity markets to lifetime highs. During the April- March period, FIIs have pumped a net amount of Rs 79,709 crore into the equity market.

This was the fifth consecutive fiscal year of inflow by overseas investors after they pulled out a net amount of Rs 47,706 crore from the share market in 2008- 09.

Courtesy: Mail Today