Moody boost for Modi: India's sovereign bond rating raised

Moody boost for Modi: India's sovereign bond rating raised

Moody boost for Modi: India's sovereign bond rating raised

Yashwant Sinha, BJP member and former finance minister of India said "It is ironic that just a day before the ratings upgrade, finance minister Arun Jaitley had hinted at a change in the fiscal glide path".

The outlook on new rating is stable - this means that factors that can lead to a downgrade of India's rating and the ones that can upgrade its score are evenly balanced.

"The decision to upgrade the ratings is underpinned by Moody's expectation that continued progress on economic and institutional reforms will, over time, enhance India's high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term, " said Soumya Kanti Ghosh, economist at the State Bank of India.

Along with the rating upgrade, the Moody's also changed the outlook for India's rating to stable from positive.

According to the raise, India's position has gone up from "Baa3" to "Baa2". HDFC Chairman Deepak Parekh said, "I've always felt India's rating was far below than what it should be".

"A ratings upgrade will marginally benefit the Indian corporates to borrow at a cheaper rate".

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"SBI was always constrained by the country rating. Bond yields are also expected to fall, which will be beneficial for banks".

Even during the late-afternoon trade session, both the indices maintained their upward trajectory, supported by broadly positive Asian markets and healthy uptake in bank, metal and consumer durable's counters. "The move is also good for capital flows into the country as a large part of worldwide capital allocations are rating linked".

India Inc captains also hailed the Moody's move. "It is a belated recognition of the positive steps taken in the past few years".

"While a number of important reforms remain at the design phase, Moody's believes that those implemented to date will advance the government's objective of improving the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth", the agency said. Additional inflows might help aid in the Indian rupee. "New long term investors such as pension funds will now start to invest in Indian bonds and existing long term investors could increase the allocation to Indian bonds".

"The rating upgrades for IOC, BPCL and HPCL follow the upgrade of the sovereign rating and reflect the strategic importance of the oil marketing companies as they own and operate the majority of the country's fuel refining entities and most of the fuel distribution infrastructure", Moody's said.

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