The Reserve Bank of India will conduct a 15-day variable rate reverse repo (VRRR) auction on August 31 to absorb ₹6 lakh crore from the banking system, marking what is likely the biggest auction in recent times. According to The Hindu BusinessLine, this comes in response to surplus liquidity arising from robust inflows via Foreign Currency Non-Resident (Bank) deposits. As per RBI data, the liquidity system in the banking system stood at ₹3,74,942.34 crore as of August 27, 2026. Between June 8, 2026, when banks started mopping up resources under the RBI's concessional swap facility, till August 21, 2026, FCNR (B) deposits saw an accretion of a whopping $65.397 billion. Under the RBI's concessional swap facility, banks and public sector undertakings raised $4.860 billion (via Overseas Foreign Currency Borrowings) and $2.591 billion (via External Commercial Borrowings), respectively.
India's industrial production data will be released on August 28, with industrial output growth rising to a 23-month high of 7.3 per cent in June, up from a downwardly revised 5 per cent in May, according to the National Statistics Office (NSO). As reported by Business Standard, the Index of Industrial Production (IIP) stood at 123.1 in June, compared with 114.7 a year earlier. The increase was supported by a favourable base effect and broad-based growth across all four major sectors. Mining and quarrying, manufacturing, electricity and gas supply, and water supply, sewerage and waste management all recorded growth during the month. Manufacturing output grew 7.8 per cent in June, sharply higher than the 5.2 per cent growth recorded in May, with 19 of the 23 industry groups covered under manufacturing recording year-on-year growth.
Manufacturing data will also be released on August 28, showing strong sectoral performance across multiple industries. According to Business Standard, electrical equipment recorded the strongest increase at 34 per cent, followed by motor vehicles, trailers and semi-trailers at 17.5 per cent and food products at 10.8 per cent. Four industry groups—petroleum products, chemical products, wearing apparel and wood products—recorded a decline. The sector accounted for most of the rise in overall industrial production. Electricity and gas supply grew 10.6 per cent in June, compared with 10.3 per cent in May, remaining the fastest-growing major segment. Electricity generation from renewable sources rose 7.3 per cent, while non-renewable generation increased 13 per cent.
Foreign exchange reserves data will be released on August 28, offering an update on India's external financial position. As reported by Business Standard, India's forex reserves rose by $9.905 billion to $716.907 billion in the week ended August 14, according to the RBI, following a $14.136 billion jump in the previous week. The increase took reserves to $707.002 billion as of August 7. India's reserves had reached a record high of $728.494 billion in the week ended February 27 before the West Asia conflict led to several weeks of declines as the rupee came under pressure and the RBI intervened in the foreign exchange market. For the week ended August 14, foreign currency assets, the largest component of the reserves, increased by $7.225 billion to $581.851 billion.
Global markets are likely to take cues from US PCE inflation and Fed Chair Kevin Warsh's Jackson Hole address this week, against the backdrop of elevated oil prices and global bond yields. As per HDFC Treasury Desk, attention this week will turn to US July PCE inflation, with headline and core PCE expected to rise 0.1% and 0.2% MoM, respectively. The core print will be closely watched for cues on underlying inflation momentum and the Fed's policy outlook. The Jackson Hole Symposium begins on Thursday, with Fed Chair Kevin Warsh's address on Friday likely to be closely watched for further guidance on the path of interest rates. In India, July IIP will be released on Friday, providing further cues on industrial and manufacturing activity. Commodities remain in focus with Brent crude rising over 6% last week to $94/bbl amid continued Middle East supply disruption concerns, while gold gained over 5% to above $4,600/oz supported by dollar weakness and safe-haven demand.
