India forex reserves fall US$5.3b as RBI defends rupee

[NEW DELHI] India's foreign exchange reserves fell sharply as the central bank stepped in to defend the rupee.

The reserves fell by US$5.35 billion to US$481.9 billion in the week ended March 13, according to data published by the Reserve Bank of India.

The rupee weakened against the dollar amid a turmoil in the global financial markets triggered by the coronavirus pandemic, and fell to a record low on Thursday amid persistent selling by foreign portfolio investors. They have pulled out a record US$10 billion from Indian shares and bonds so far this month.

Local equities have fallen to a three-year low, while corporate bond markets have faced selling pressure due to tighter liquidity conditions after the central bank placed a large private bank under moratorium.

Nevertheless, falling oil prices and slowing imports due to subdued domestic consumption are likely to offer some buffer to reserves, which are strong enough to cover nearly 10 months of imports.

BLOOMBERG

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