The Reserve Bank of India (RBI) has reported net sales of $15.2 billion in December 2024, a decrease of $5 billion from the previous month, as part of its efforts to stabilize the rupee. The central bank has been actively intervening in the foreign exchange market to support the rupee, which has been facing record lows due to uncertainties surrounding US trade tariffs, geopolitical tensions, and portfolio outflows.
According to the RBI bulletin, the bank sold $69 billion in forex and purchased $53.9 billion in the spot market, resulting in a net outstanding forward sales of $67.9 billion. The rupee has appreciated against a basket of 40 currencies, with a trade-weighted real effective exchange rate (REER) of 104.82 in January, indicating a weakening of the currency.
Despite the appreciation, a weaker currency is generally good for exports but bad for imports. The rupee stood at 86.79 against the US dollar, up 19 paise in early trade on Thursday.
In other news, the correction in the equity market has had a significant impact on the state-owned Life Insurance Company (LIC), with its total value of stocks dipping by over Rs 84,000 crore in the past month and a half. As of February 18, 2025, LIC’s holdings in listed companies valued at Rs 13.87 trillion, down 5.7% from the December 2024 quarter. Analysts expect the market to remain volatile, with little scope for early relief, and may continue to weigh on LIC’s fortunes.