A game of money-go -round.

"The country's forex reserves crossed the $600 billion mark for the first time on the back of continued foreign investment flow into the capital markets. According to the RBI (Reserve Bank), forex reserves increased by $6.8 billion in the week ended June 4 to $605 billion," Times of India (TOI). This takes India to fifth in the list of countries after China, Japan, Switzerland and Russia, wikipedia. Foreign currencies come into banks when foreign investors buy Indian shares or debt and the RBI buys them from the banks. "Every $1 billion that the RBI purchases results in around Rs 7,300 crore (Rs 73 billion) of rupee funds being released." Influx of foreign currencies causes the rupee to become stronger and, by buying dollars from the market, the RBI tries to limit the rise in the value of the rupee. "India's merchandise exports hit $7.71 billion in the first week of June", a growth of 52.4% compared to the same period last year, Mint. Imports rose 82.91% to $9.1 billion. "Exports have remained above $30 billion for three consecutive months starting March, when shipments hit a record $34.45 billion." A stronger rupee is detrimental to exports by making our goods more expensive and, by making imports cheaper, hurts Indian industry. "India's currency has climbed 1.5% against the dollar in May to beat all its regional peers," Business Standard (BS). "Barclays Plc expects the rupee to climb to 72.50 per dollar by next quarter from around 73 now owing to supportive flows, attractive valuations and a less interventionist RBI, according to a note published last week." Currency exchange companies are already offering 72.50 to the dollar. The inflow of forex is because foreign portfolio investors (FPI) poured Rs 2,74,034 crore (Rs 2.74034 trillion) into our equity markets in 2020-21, Ministry of Finance. Indian stock indices, The BSE Sensex closed at a record 52,578 and the Nifty also hit a record at 15,835 on 10 June. This is not all. "Raamdeo Agrawal, co-founder and joint managing director, Motilal Oswal Financial Services (MOFSL) said in a May 27 note that he expects the S&P BSE Sensex to hit the 200,000 mark in the next 10 years - up nearly four times (4x) from the current level of around 51,500 - and advises investors 'not to bet against India'," BS. Iran's stock index soared to 2 million in August 2020, and is now trading at 1.1 million, while its currency the rial has plunged from 32,000 to the dollar in July 2015 to 238,000 today, The Indian Express (TIE). Lured by the market rally Indians are rushing to buy shares which is shown by the rise in dematerialised (Demat) accounts without which no one can buy shares. "Indian investors opened a record 1.42 crore (14.2 million) new demat accounts in FY21, nearly three times the figure in the previous fiscal year," while "In March 2021 alone, 19 lakh (1.9 million) demat accounts were created," Hindustan Times (HT). "According to an analysis of data available with the stock exchanges, 30 firms raised Rs 31,277 crore (Rs 312.77 billion) through initial public offerings (IPOs) in 2020-21, significantly higher than Rs 20,352 crore mopped up through 13 initial share-sales in the preceding fiscal year," Deccan Herald. Given the ferocity of the second wave, when the number of new cases in one day hit a world record of over 400,000, BBC, share prices are zooming, prompting Andy Mukherjee to wonder if, "India's stock market appears to live on some other planet," Mint. "The RBI recently warned about a possible stock market bubble in its annual report for FY21," India Today. The RBI is directly responsible by keeping real interest rates at negative to help the government and hurting savers, and increasing liquidity by buying dollars and government bonds. Slash interest rates to increase liquidity, which increases share prices, drawing a flood of foreign currencies raising the rupee, so buy dollars to further increase liquidity which increases share prices. A money-go-round game by the RBI. Hope it doesn't derail.