India’s foreign exchange reserves rise by $3.2 billion to $696.6 billion

Continuing an upward trend, India’s foreign exchange reserves increased by $3.293 billion to $696.610 billion in the last week of December 2025, according to data released by the Reserve Bank of India (RBI).

In the previous week, as reported by the central bank, the country’s foreign exchange reserves had risen by $4.368 billion.

According to RBI data, in the week ended December 26, the value of foreign currency assets (FCAs), the largest component of the reserves, increased by $184 million to $559.612 billion.

Gold reserves registered a sharp rise of $2.956 billion to $113.320 billion. The increase in gold reserves was attributed to a surge in international gold prices during the period.

Meanwhile, the value of Special Drawing Rights (SDRs) increased by $60 million to $18.803 billion. The reserve position with the International Monetary Fund (IMF) also rose by $93 million to $4.875 billion.

A country’s foreign exchange reserves are a key indicator of economic health and play a crucial role in maintaining exchange rate stability.

The rise in reserves also reflects the central bank’s efforts to manage liquidity and ensure stability in the foreign exchange market. The RBI has stated that it closely monitors developments in the forex market and intervenes when necessary to maintain orderly market conditions. Such interventions are aimed at reducing excessive volatility in the rupee’s movement and are not linked to any fixed exchange rate target.

The latest increase in reserves was also supported by the RBI’s USD/INR buy-sell swap auction worth $5 billion, conducted on December 16 to inject liquidity into the banking system.

Under the swap arrangement, banks sold US dollars to the central bank in exchange for rupees and agreed to buy back the same amount of dollars at the end of the swap period. The transaction was settled on December 18, contributing to the overall reserve position.

The steady rise in foreign exchange reserves comes amid strong capital inflows into the country, with India witnessing a notable increase in foreign direct investment commitments during the current financial year.

India’s nominal GDP growth is expected to improve to about 11 per cent in FY27 with real growth at 7.2 per cent, driven by domestic credit‑led consumption and policy support, a report said on Friday.

The report from SBI Mutual Fund said that it is “constructive on growth” in the medium term with structural reforms and premiumisation driving the outlook, though global slowdown and geopolitics remain key risks. Real GDP growth in FY26 averaged 8 per cent year‑on‑year in the first half while nominal growth was subdued at 8.8 per cent.

The fund house expected inflation to mean‑revert to about 4 per cent in FY27, with the Reserve Bank of India (RBI) likely to keep policy on a long pause unless global growth deteriorates.

The mutual fund highlighted recent liquidity measures including a Rs 2 trillion Open Market Operations (OMO) round and a $10 billion buy‑sell swap in mid-January.

“Rural spending outlook is modestly positive as welfare measures and low inflation mitigate the kharif income setback. A positive development of India-US trade deal could only be mildly positive for growth outlook as the country still faces stiff competition from rising dominance in Chinese exports,” the report noted.

Fiscal deficit is projected to ease to 4.2 per cent in FY27 from a likely 4.4 per cent in FY26, though state deficits remain elevated. Government bond supply could rise to Rs 29 trillion, keeping demand-supply dynamics tight.

The rupee’s near 5 per cent depreciation in 2025 was attributed to hedging demand that has pushed up forward premiums in India and driven the Indian fixed income yields higher too, the report noted.

Typically, India’s lower inflation relative to the US, stable crude prices, fiscal discipline, and current account deficit (CAD) under 1 per cent of GDP support Indian assets and the rupee.

Bottom-up focus on consumption, financials, and select industrials would be the key, the fund house suggested.

Investments by retail investors in the primary market reached a record Rs 34,840 crore in FY26 (April-November period), up from Rs 34,336 crore in FY25 (April-March) and Rs 18,057 crore in FY24 (April-March), according to industry data.

Indian markets saw strong fund‑raising in 2025, with 103 mainboard IPOs raising over Rs1.76 lakh crore and 267 SME IPOs mobilising a record Rs 11,435 crore. Of the 108 mainboard listings, 72 opened above their issue price and 36 traded below it. Among gainers, 16 stocks rose 30-70 per cent on listing while 22 gained 10-30 per cent and 34 rose 1-10 per cent.

Despite heavy primary‑market participation from retail investors, they were net sellers in the secondary market, recording outflows of around Rs 13,000 crore in FY26 till November-end versus inflows of Rs 1.25 lakh crore in FY25.

Agencies