Moody's Upgrades India's Rating; Here's Why Markets Are Cheering

Though S&P even after the Moody's rating positive has maintained the outlook and reiterates that the economic position of India holds weak, we need to see how the economy holds at a holistic level.

Updated: Friday, November 17, 2017, 15:02 [IST]

Moody's Upgrade for India has come in after a span of 13 years and reaffirms the government's policy moves such as demonetisation, IBC, GST and the latest recapitalization for the public sector banks. The outlook has been changed to stable which also is a answer to the Narendra Modi critics.

Stock, Current And Bond Market Performing Well

As an immediate effect, the currency, stock and bond markets have shows positives with the benchmark indices gaining in 1%, rupee also opened higher in trade today after the Sovereign bond's have been provided a rating higher. In fact, the rupee gained 1%, which means cheaper imports like crude oil. This would help in lowering inflation.

It is expected that instead of the correction coming in the stock markets, the December month is likely to see new highs for Sensex and Nifty, as a sovereign upgrade would mean fresh inflows into the capital markets.

Upgrade has a potential to boost GDP to 8% levels by next year

Ace investor Jhunjhunwala does not see the upgrade as some surprise and sounds bullish on the growth rate of the Indian economy with rate of 8% by next year.

However, one needs to see whether it translates into growth in GDP, as an upgrade has the potential to bring in fresh inflows into the Indian economy from abroad.

Access to capital and Cost of funds from Overseas market will ease

The upgrade shall ease the borrowing for the Indian government as well as corporate in respect of the cost going forward as creditworthiness means lower interest rates.

Some of the earlier funds that did not see any entry into the country due to lower rating will now see inflows coming into the Indian economy.

Capital Inflows shall increase

Confidence in the international community shall be increased with the upgrade. The earlier tags of policy paralysis and political gridlock for India will now subside to provide more room for the capital inflows.