India's foreign exchange reserves declined by $5.7 billion to $666.9 billion for the week ended June 26, 2026. Simultaneously, the services sector showed slower growth, with the June PMI moderating to 57.4. Investors should track these shifts as global economic signals remain mixed and foreign portfolio investment flows continue.
India’s foreign exchange reserves saw a notable contraction in the week ending June 26, 2026, falling by $5.7 billion to a total of $666.9 billion. This drop was primarily driven by a reduction in foreign currency assets and a decrease in gold holdings. While this represents a significant weekly decline, the overall reserve position remains at a high level compared to historical averages, providing the Reserve Bank of India with a buffer to manage currency volatility.
Services Sector Growth Moderates
The domestic services sector, a key driver of the Indian economy, showed signs of cooling in June. The Services Purchasing Managers' Index (PMI), which measures business activity, slipped to 57.4 from 59.8 in May. While any reading above 50 indicates expansion, the June figure marks the slowest growth for the sector since January 2025. This moderation suggests that while service providers remain in a growth phase, the pace of new business intake and activity has slowed compared to earlier in the year.
Global Context and Policy Shifts
Global economic indicators remain uneven, which impacts emerging market sentiment. In the Eurozone, activity has stabilized, with the Composite PMI rising to 50.0. Conversely, the United Kingdom continues to face pressure, with its Composite PMI at 49.3, indicating a second month of contraction. Domestically, the government has provided relief to several industries by lifting natural gas supply restrictions that were originally imposed due to geopolitical tensions in West Asia. This restoration of normal supply is expected to support operations for fertilizer plants, refineries, and city gas distributors.
Investment Trends and Market Flows
Despite the decline in reserves and the moderation in PMI data, investment sentiment appears resilient. Foreign Portfolio Investors (FPIs) maintained a net buying trend as of July 3, 2026, with an inflow of $315 million, of which $247 million was directed specifically toward Indian equities. Additionally, domestic mutual funds have shown strong activity, recording net investments totaling Rs 99,519 million in July. Investors should monitor how these foreign and domestic flows evolve in the coming weeks, especially in light of the cooling PMI data and global central bank policies that continue to influence liquidity in emerging markets.