Goldman Sachs upgrade India's ratings. RBI serious about quelling inflation

Business

oi-Shoaib MD

By Shoaib Md

Published: Monday, August 8, 2011, 13:27 [IST]

The Wall Street giant, Goldman Sachs, upgraded India's rating to "market weight" on the first trading of the week. Earlier the rating was "underweight". This should give foriegn investors the confidence to invest in India.

Up-gradation was in respect to the turn in macro cycle, as oil prices will lower supported by better valuation, and fast faced policy reform.

Goldman said in a note to its investors that RBI's raise of repo rate by 50 basis points was a clear sign that the central bank is vigilant in quelling down inflation expectations.

Even if this affects the near-term prospects, the policy tightening was a necessity to reign in inflation expectations. Goldman said in it notes that this will ultimately benefit the Indian equity market on a medium to longer term horizon.

It is expected that after raising the interest rate for 11 times since mid-March 2010, the Central Bank could be approaching the near end of its tightening cycle.

One of the reasons for which Goldman increased its rating for India was deteriorating conditions of the US, especially in the wake of Standard & Poor's downward rating of the country.

(Read stories on recessions, and Standard & Poor's rating downgrade)

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