India's foreign exchange reserves increased by $1.62 billion to $343 billion for the week ended April 3, Reserve Bank of India (RBI) data showed. According to analysts, the Indian reserves got a boost during the week under review from an exponential rise in the foreign currency assets, the biggest component of the forex reserves.
The foreign currency assets, expressed in US dollar terms, include the effect of appreciation or depreciation of non-US currencies such as the pound sterling, euro and yen held in reserve.
The Indian reserves hold nearly 20-25 per cent of the non-dollar currencies.
The reserves are also being build up by the RBI to absorb any future global financial shock like the one witnessed in June 2013. "The reserves are being build-up to counter any future financial shocks like the one which was witnessed at the time the tapering announcements were made. Apart from that, the reserves will also act as a support to the Indian rupee," Anindya Banerjee, Kotak Securities senior manager, currency derivatives, said.
"The Indian rupee is very stable currently and the reserves will make sure that it will remain so. A healthy reserves will make sure that any other external shocks are taken care of," Banerjee added.
The RBI is cautious about the US Fed's stand that the rate hike might take place in the later part of the year.
With higher interest rates in the US, the foreign portfolio investors (FPIs) are expected to be led away from the emerging markets such as India. For the previous week ended March 27, the Indian reserves had increased by $1.38 billion to $341.37 billion. The Indian reserves had risen by $4.26 billion to $339.99 billion in the week ended March 20.
