MUMBAI: The net Foreign Direct Investment (FDI) flowing into India reached a 21-month high in October reflecting the strengthening fundamentals of the economy, according to data compiled by the RBI.

According to RBI data, the net FDI in India for October stood at $5.9 billion up from $1.55 billion in September. This is the third month in a row to show an increase in net FDI.

Around four-fifths of the gross FDI flows into equity were invested in sectors such as manufacturing, retail, energy and financial services sector.

Mauritius, Singapore, Cyprus, and Japan were the leading countries from where FDI flowed into the country, accounting for as much as four-fifths of the total during the month.

However, data for the April-October period of the current financial year showed a decline in net FDI inflows to $10.4 billion from $20.8 billion in the same period last year.

According to UN ESCAP data released this month, India remains the highest recipient of FDI in 2023 for the second consecutive year amid a slowdown worldwide.

Net inflows under external commercial borrowings (ECBs) and non-resident deposit accounts are much higher than last year and outward FDI commitments have also declined leading to higher foreign exchange reserves.

India's foreign exchange reserves increased for the fifth week in a row to scale a 20-month high of $615.97 billion as of December 15, according to the latest data released by the RBI.

An increase in the foreign exchange reserves helps the RBI to stabilise the rupee when it turns volatile.

The RBI intervenes in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall when it comes under pressure.

Any sharp decline in the country’s forex kitty leaves the RBI less headroom to intervene in the market to stabilise the rupee.