Moody’s rating upgrade is a shot in the arm: Analysts

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Global investors will likely start looking at the India story more favourably after Moody’s upgrade of the sovereign rating, analysts have said. The sentiment will be further boosted by a gradual fiscal consolidation, they added.

How analysts view it

“Now that the growth recovery has been better than anticipated, Moody’s has changed the rating outlook. Markets price rating actions much ahead of actual changes so the current bullishness and investment sentiment has already priced in this change,” the Mint quoted Arvind Chari, chief investment officer at Quantum Advisors, as saying. Foreign investors may stay invested in India and over time increase their India allocation, he added.

Suvodeep Rakshit, senior economist, Kotak Institutional Equities, said Moody’s action underlines the fact that financial sector risks are lower now. “The fiscal situation is also better than what it seemed at the start of Covid. While there are some structural issues on growth, some of the reforms and measures taken since the pandemic and measures before it will be positive for growth in the medium-to-long term,” he is quoted as saying in the Mint report.

Rating

Moody’s has revised India’s sovereign credit rating outlook to stable on receding risks posed by the financial sector to the economy. The credit rating was, however, retained at Baa3– the lowest investment grade.

The rating agency has also cautioned that weak economic conditions or a reemergence of financial sector risks will put pressure on sovereign rating.

Moody’s Investors Service also raised the rating outlook for 18 Indian companies and banks, including Reliance Industries Ltd, Infosys Ltd, State Bank of India and Axis Bank, to ‘stable’ from ‘negative’, in line with the change made to the sovereign credit rating outlook.

Moody’s has projected the Indian economy to grow at 9.3% in FY22.