By Anirban Nag
India’s foreign-exchange reserves plunged the most in about eight years as the central bank stepped in to defend the rupee.
The reserves fell by $5.35 billion to $481.9 billion in the week ended March 13, according to data published by the Reserve Bank of India. That’s the most since November 2011 when the hoard dropped $5.7 billion, according to data compiled by Bloomberg.
The rupee weakened against the dollar as turmoil engulfed 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 $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.
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