India’s reserves at record high as JPMorgan Index date nears

By Malavika Kaur Makol

India’s foreign exchange reserves increased to a record high of $651.5 billion last week, as foreigners pile into its bonds ahead of their inclusion into JPMorgan Chase & Co. flagship emerging market debt index. 

The figure cited by Reserve Bank of India Governor Shaktikanta Das when announcing the latest monetary policy decision on Friday stands to be an increase of $4.8 billion from the week before, calculations by Bloomberg show.  

With global investors plowing money into Indian debt before the Wall Street bank’s index change goes live on June 28, the RBI has sought to crimp volatility in the rupee with currency market interventions. Purchases of dollars in the open market would push up reserves. 

The pace of overseas flows into securities that are eligible to be included in the index, known as Fully Accessible Route notes, picked up at the end of last month. The stream of money continued this week, with investors undeterred by the poor showing of Prime Minister Narendra Modi’s party in the election. 

Even so, the rupee has barely budged against the dollar, compared with an appreciation of the won, the baht and the ringgit this month. 

“Maintaining the perception of macro and financial stability would be key for the central bank at this stage,” said Jean Chia, global chief investment officer at Bank of Singapore. She sees the rupee appreciating to 83 per dollar by December, from about 83.41 on Friday.