Published: Sat, November 18, 2017
Money | By Armando Alvarado

India Inc. hails ratings upgrade

India Inc. hails ratings upgrade

In what can be taken as an endorsement of Prime Minister Narendra Modi's ongoing structural reforms and something that can boost investment sentiment, worldwide rating agency Moody's Investor Services, on Friday, lifted India's sovereign rating by a notch to Baa2 from Baa3 after 13 years.

CreditSights reiterated its broad "market perform" view on the Indian bank complex as it has already outperformed this year with most bonds trading tight or fair relative to the Asia Pacific fair value curve. "More importantly, it also emboldens the government to stay true to the path of strong and transformational reforms in the coming days", he said.

US-based Moody's today upped India's rating to Baa2 from Baa3, changing outlook to "stable" from "positive", seen as a boost to the Modi government's reform agenda. Moody's counted the GST, measures to address non-performing loans in the banking system, demonetisation, Aadhaar system of biometric accounts and targeted delivery of benefits through the Direct Benefit Transfer (DBT) as key reforms undertaken by the Modi government.

The benchmark BSE Sensex hit as high as 33,520.82 before paring gains to end the session up 235.98 points or 0.71 percent at 33,342.80.

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The rupee saw its biggest gains in four years on Friday as it strengthened by 60 paise at 64.72 per dollar compared to its previous close of 65.32 per dollar.

"The ratings upgrade along with the recently reported improvement in India's ease of doing business ranking underline the fact that we are moving in the right direction". As it is, there's surplus liquidity back home, interest rates are low and unless capacity utilisation picks up, fresh investment revival will have to wait.

Radhika Rao, an economist at DBS, felt that Moody's upgrade may not be seconded by other global agencies like Standard & Poor's and Fitch Ratings. "Moody's upgrades India's sovereign ratings for the 1st time since 2004". Recognition for recent economic reforms in India & 5000 year track record of no default. The general outlook on the rating is "stable". HDFC Chairman Deepak Parekh said, "I've always felt India's rating was far below than what it should be". "The move is also good for capital flows into the country as a large part of global capital allocations are rating linked".

"Many who had doubts about India's reform process can now seriously introspect on their position", said Jaitley.

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