RBI's increased intervention in forwards market to aid exports

To help manage excess liquidity

by Janhavi Behere

The RBI bought USD 8 billion of foreign currency in forwards market in March 2017, the highest in almost three years, as per media reports. When intervening in the forwards market, RBI purchases dollars in the spot market and subsequently sells them. It then buys dollars in the forwards market to push back the liquidity injection to a future date. Currently, there is surplus liquidity in the banking system. In addition to excess liquidity, India’s exports may face the burnt of a strengthening rupee. The RBI’s forwards intervention strategy will incentivise exporters to hedge more and cause importers’ hedging to fall thereby controlling surplus liquidity. RBI’s increased intervention is likely to keep foreign-exchange swap rates at an elevated level, preventing further strengthening of the rupee and improving exports.

References
1. http://www.livemint.com/Industry/QoIGeXmgk5A1rRgHt0iglJ/RBI-targets-rupee-forwards-as-cash-hinders-spot-intervention.html
CMIE STATISTICS
Unemployment Rate
Per cent
3.5 -0.0
Consumer Sentiments Index
Base September-December 2015
96.7 -0.4
Consumer Expectations Index
Base September-December 2015
96.2 -0.6
Current Economic Conditions Index
Base September-December 2015
97.3 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Jun 16 Sep 16 Dec 16 Mar 17
New projects 1.46 2.37 1.42 2.92
Completed projects 0.91 2.21 0.91 1.77
Stalled projects 1.40 0.64 1.01 0.35
Revived projects 0.40 0.51 0.17 0.62
Implementation stalled projects 0.50 0.37 0.80 0.27
Updated on: 27 Jun 2017 4:20PM
Quarterly Financials of Listed Companies
(% change) Jun 16 Sep 16 Dec 16 Mar 17
All listed Companies
 Income -0.9 2.1 6.2 10.3
 Expenses -0.3 1.9 6.4 11.8
 Net profit -4.0 14.6 38.9 18.2
 PAT margin (%) 6.9 6.9 6.1 6.3
 Count of Cos. 4,519 4,489 4,484 4,289
Non-financial Companies
 Income -2.5 0.6 6.0 11.8
 Expenses -2.9 -0.2 7.4 15.5
 Net profit 9.7 26.7 23.4 -1.0
 PAT margin (%) 7.4 6.9 6.3 6.5
 Net fixed assets -9.2 7.7
 Current assets 8.1 2.5
 Current liabilities 11.6 9.3
 Borrowings 3.1 5.6
 Reserves & surplus 8.4 7.7
 Count of Cos. 3,515 3,491 3,491 3,346
Numbers are net of P&E
Updated on: 27 Jun 2017 4:30PM
Annual Financials of All Companies
(% change) FY13 FY14 FY15 FY16
All Companies
 Income 12.5 9.9 5.0 1.0
 Expenses 12.8 9.8 5.0 1.1
 Net profit 1.1 -2.1 2.0 -11.6
 PAT margin (%) 3.6 3.2 3.3 3.2
 Assets 14.3 12.2 9.3 8.1
 Net worth 9.6 9.5 8.6 7.4
 RONW (%) 6.8 6.2 6.2 5.6
 Count of Cos. 24,675 22,117 21,242 17,323
Non-financial Companies
 Income 11.8 9.6 4.1 0.0
 Expenses 12.2 9.2 4.2 -0.8
 Net profit -8.5 -2.4 -5.0 12.5
 PAT margin (%) 2.4 2.2 2.2 2.9
 Net fixed assets 12.9 11.6 13.0 12.4
 Net worth 7.8 8.6 7.3 6.7
 RONW (%) 5.5 5.1 4.9 5.9
 Debt / Equity (times) 1.1 1.1 1.1 1.0
 Interest cover (times) 2.1 1.9 1.9 2.1
 Net working capital cycle (days) 72 69 66 66
 Count of Cos. 19,170 17,554 16,934 14,134
Numbers are net of P&E
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