Kolkata: India’s foreign exchange reserves dipped by $2.7 billion in the week to November 26, possibly because foreign portfolio investors continued offloading their equity investment from the local markets following US Federal Reserve’s observations on accelerating tapering.
The reserves stood at $637.687 billion, falling from $640.4 billion, Reserve Bank of India’s weekly data showed.
RBI however does not give any reason for the change in reserves.
Foreign currency assets, which reflects the change in valuation of reserves held in other global currencies like euro, pound sterling and Japanese yen, fell by $1.048 billion to $574.664 billion. This shows that the fall in reserves was not entirely due to the dip in valuation.
“FPIs have been selling continuously from November 23 onwards. Stretched valuations, Fed’s observations on accelerating tapering and concern on inflation and the potential impact of the Omicron variant on economic activity and corporate earnings are the factors influencing the selling,” Geojit Financial Services chief investment strategist VK Vijayakumar said.
In early November many large foreign brokerages had downgraded India from overweight to neutral on stretched valuations.
On Friday, FPIs sold equity worth Rs 8259 crore, data from NSDL showed.
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