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Quick Update: Moody’s Credit Rating Upgrade on India November 17, 2017
Moody’s Investors Service, one of the three major global credit rating agencies in the world has upgraded its sovereign rating from Baa3 to Baa2 this morning. Besides that, Moody’s has also upgraded India’s local currency senior unsecured rating to Baa2 from Baa3 and its short-term currency rating to P-2 from P-3.
Author : Tan Wei Yine


Quick Notes: Moody’s Credit Rating Upgrade on India

Moody’s Investors Service, one of the three major global credit rating agencies in the world has upgraded its sovereign rating from Baa3 to Baa2 this morning. Besides that, Moody’s has also upgraded India’s local currency senior unsecured rating to Baa2 from Baa3 and its short-term currency rating to P-2 from P-3.

The upgrade was done on the expectation that continued progress on the economic and institutional reforms will enhance India’s growth potential in the medium- to longer-term. The current reforms and structural changes are also paving a stable financing base for government debt, which could help ease fiscal spending pressures over time. At this current juncture, Moody’s opines that India’s high debt burden remains as a ball and chain to the country’s credit profile, but believes that the reforms that are already in place have reduced the risk of sharp increase in debt.

FIGURE 1: SENSEX rallied upon Moody's sovereign rating upgrade

FIGURE 2: INR appreciated against USD

FIGURE 3: India govvies rallied amid sovereign rating upgrade.

Our Take

Market participants have responded favorably towards Moody’s recent move, as we saw rally across Indian stocks, bonds and the Rupee (see above Figures). Moody’s has recognized the government’s effort to push through meaningful reforms such as Digital India, demonetization, GST and the recent injection of capital into state-banks, which are viewed as necessities to foster a sustainable growth story for the second largest economy in the world. While uncertainties and volatilities that followed-suit are inevitable, these reforms have nevertheless provided greater assurance and fortification towards India’s economy framework. We foresee that the upgrade on sovereign ratings have the tendency to drive financing cost lower ( remember Indonesia's S&P upgrade?) and stimulate the currently subdued investment activities on India’s economic front.

Want to know more about India’s compelling growth story? Have a read here!


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