All-Time Closing Highs, Forex Reserves Establish New Optimums and other Equities & FX Updates

Indian Indices Obtain All-Time Closing Highs
The two Indian equity benchmark indices of Sensex and Nifty continued with their momentous upward growth over the past few weeks to establish and instate all time highs on the close of Friday, September 3rd. BSE Sensex, was capable of achieving and establishing a new zenith, with the indices having surpassed the 58,000 mark for the first time since its inception, with the index exhibiting a lifetime closing high of 58,129.95. Nifty 50, a benchmark Indian stock market index comprising the weighted average of the 50 largest publicly listed Indian companies, displayed a similar resemblance to Sensex’s new developments, as it registered an all-time closing apex of 17,323.60. Robust performances by the Indian stock markets in recent weeks can be accredited to remunerative performances by metal, energy, automotive as well as technology equities.
 
Forex Reserves Establish New Optimums
Following an underwhelming decline of $2.47 billion to sink to a valuation $616.895 billion in the week ended August 20th, India’s foreign exchange reserves experienced a scintillating escalation of $16.663 billion to procure a prospective all-time pinnacle of $633.558 billion in the week ended August 27th.declined by $2.099 billion to possess valuations of $619.365 billion in the week ended August 13th, according to the weekly reports published by the Reserve Bank of India (RBI).
 
The primary contributor for this new zenith in valuation is due to the fact that the International Monetary Fund (IMF), on August 23rd, produced a robust Special Drawing Right (SDR) allocation of 12.57 billion (which in the most recent exchange rate equates to approximately $17.86 billion), subsequently bolstering SDR holdings in the nation and thereby launching India’s forex reserves to new all-time heights. SDRs serve as ancillary forex reserve assets which are regulated by the IMF and denote a claim to currency which can then be exchanged. The IMF distributes SDRs in accordance with the country’s existing quota.
 
Concurrently, the Indian rupee on Friday experienced a minimal provisional gain of 4 paise at 73.02 against the US dollar on Friday.
 
Low Base Effect Results in Rebound of India’s GDP Growth
Despite a tumultuous and calamitous second wave of Covid-19 which prompted state governments to impose state lockdowns and restrictions, India’s Gross Domestic Product was capable at experiencing facilitation and furtherance, as it rebounded immensely robustly to augment by 20.1% in quarter 1 of financial year 2022 (quarter ended June 2021). This potent rebounding strongly contradicts the economic performance of the country in the same quarter of the previous fiscal year, in which the nation incurred a cataclysmic contraction of 24.4%.
 
The lifting of lockdowns, accelerated vaccination rates, exponentially growing consumer spending, private sector proactiveness as well as measures to result in economic revival all have been integral in the sharp increase and rebound. 
 
This particular revitalisation has occurred primarily as a result of the low base effect - the effect which serves as the tendency of small absolute alterations from low initial amounts to be rendered into significant percentage changes. The sheer calamity incited through the previous year’s economical debacle has aggrandised the significance of this quarter’s 20.1% increase.
 
While the figures are still inferior to the GDP growth in the same period of the pre-pandemic fiscal year of 2019-20 by 9.1%, this quarterly augmentation is an instrumental indication that India is gradually recovering economically from the calamitous ramifications presented through Covid-19.


Written by: Ronojoy Borpujari