India’s Forex Reserves Jump by USD 3.293 BLN

MUMBAI: India's forex reserves jumped by USD 3.293 billion to USD 696.61 billion in the week to December 26, the RBI said on Friday. The overall kitty had increased by USD 4.368 billion to USD 693.318 billion in the previous reporting week.

For the week ended December 26, foreign currency assets, a major component of the reserves, increased by USD 184 million to USD 559.612 billion, the data released by the central bank showed. Expressed in dollar terms, the foreign currency assets include the effects of appreciation or depreciation of non-US units, such as the euro, pound, and yen, held in the foreign exchange reserves.

The value of the gold reserves jumped by USD 2.956 billion to USD 113.32 billion during the week, the RBI said. The Special Drawing Rights (SDRs) were up by USD 60 million to USD 18.803 billion, the apex bank said. India's reserve position with the IMF was up by USD 93 million to USD 4.875 billion in the reporting week, according to the apex bank's data.

Meanwhile, after a bruising 2025 for overseas investors, foreign portfolio investors (FPIs) could be staging a comeback in Indian equities in 2026. Market strategists say the conditions that triggered record outflows last year are easing while earnings visibility, valuations, and macro stability are turning supportive. In its report titled "India Equity Strategy 2026," Antique Stock Broking Limited said the FPI equity outflow in the Calendar Year 2025 was highest on absolute basis at USD 17.5 bn (or 0.3% of market cap).

We believe that CY26 could see a revival as the six-month FPI equity flow as a percentage of market cap is at (-) 1 Standard Deviation; Low FPI ownership in India despite strong earnings growth and macro outlook; Reasonable equity valuation, relative to other emerging and developed markets, and Low market beta. However, preference towards the Artificial Intelligence (AI) exposed emerging market countries relative to India may sustain in CY26 given relatively reasonable valuation is a key risk.

Mutual fund equity inflow may sustain given steady SIP flow (with increasing preference towards equity), EPFO/ NPS flow, low domestic equity ownership, and superior equity return profile relative to other asset class, the report said.

FPIs pulled out about USD 17.5 billion from Indian equities in 2025, the highest annual outflow on record in absolute terms. The selling reflected weak earnings momentum, global risk aversion, and better relative opportunities in AI-heavy markets, the report highlighted.

Corporate earnings are expected to re-accelerate sharply. Nifty earnings are projected to grow at around 16% CAGRover FY26-FY28, compared with roughly 7% over the previous two years. India's macro backdrop is unusually supportive, with Real GDP growth expected to remain around 7.5%, inflation forecast to stay benign, and the current account deficit projected below 1% of GDP. A stable currency outlook and easing global monetary conditions reduce one of the biggest risks FPIs worry about: sudden macro shocks.

Highlighting the exposure of global investors towards AI, the report said they are increasingly allocating capital to markets and companies with direct AI exposure including semiconductors, advanced hardware, cloud infrastructure, and AI-native platforms. The US, Taiwan, and parts of East Asia dominate these value chains. India, despite strong domestic growth, remains largely an AI user rather than an AI producer at scale. This creates a mismatch between where global capital wants exposure and where India's strengths lie. The report further noted that the AI risk does not hit all Indian sectors equally; capital-intensive, domestic-cycle sectors such as banks, infrastructure, and consumption may continue to perform locally.