India’s Reserves at Record High as JPMorgan Index Date Nears

India’s foreign exchange reserves reached a new high of $651.5 billion last week, driven by foreign investors flocking to the country’s bonds ahead of their inclusion in JPMorgan Chase & Co.’s flagship emerging market debt index. This increase of $4.8 billion from the previous week was highlighted by Reserve Bank of India Governor Shaktikanta Das during the announcement of the latest monetary policy decision on Friday. In order to mitigate rupee volatility, the RBI has been intervening in the currency market by purchasing dollars, which contributes to the rise in reserves. This surge in reserves reflects the confidence of global investors in India’s debt market.
Overseas investments in securities eligible for inclusion in the index, also known as Fully Accessible Route notes, increased towards the end of last month. This trend continued this week, despite the recent election results negatively impacting Prime Minister Narendra Modi’s party.

However, the Indian rupee has shown little movement against the US dollar, in contrast to the appreciation of other Asian currencies such as the South Korean won, Thai baht, and Malaysian ringgit this month.

Jean Chia, the global chief investment officer at Bank of Singapore, emphasized the importance of maintaining the perception of macro and financial stability for the central bank. She predicts that the rupee will appreciate to 83 per dollar by December, compared to the current rate of 83.41 as of Friday.