Moody's Downgrade Maybe Slightly Sentimentally Negative

The downgrade by Moody's could be slightly sentimentally negative for the markets, given that the rating is now on par with S&P and Fitch.

"Even though it is a downgrade, the rating is still investment grade. This is on par with the rating of S&P and Fitch Ratings. This is unlikely to impact materially since the strength of the market is largely due to the humongous liquidity floating in the global financial system. The government needs to prepare a medium-term fiscal consolidation roadmap to inspire confidence in markets. Of course, this is slightly sentiment negative," VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said.

"Moody's decision to lower India's rating is a reflection of the stress in Indian economy and fiscal situation that has been amplified by the virus outbreak. We believe the subdued policy response for short term alleviation of the lockdown related stress would lead to subdued economic growth and lower tax collection. This is likely to aggravate the weakness in credit profile of India. The policy of balancing act seems to have not given the desired results," said Abhimanyu Sofat, Head of Research, IIFL Securities on Moody's downgrades India's ratings to BAA3.

One will have to wait and see how the stock markets react in the coming days to the downgrade.