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Moody's upgrades India's sovereign bond rating for first time in 14 years

19 November 2017, 02:31 | Melanie Burgess

Moody's upgrades ratings of nine PSUs

Moody's Upgrades India's Ratings; Amit Shah Pats Modi's Back

Moody's Investors Service on Friday upped the long-term ratings of four Indian financial institutions including SBI and HDFC Bank by a notch to Baa2 following the upgrade of the country's sovereign rating to the same level. Moody's upgraded India's rating to to Baa2 from Baa3.

Reacting to the ratings upgrade, finance minister Arun Jaitley said, "Many who had doubts in their minds about India's reform process would need to now seriously introspect on their thinking". MARKETS SURGE At 0550 GMT, the benchmark 10-year bond yield was down 9 basis points at 6.97 percent, the rupee was trading stronger at 64.84 per dollar versus the previous close of 65.3250, while the NSE share index .nsei was 1.1 percent higher."We have been expecting it for a long time and this was long overdue and is very positive for the market", said Sunil Sharma, chief investment officer with Sanctum Wealth Management. "We believe that the upgrade is a belated recognition of all our positive steps that have contributed to the strengthening of the Indian economy". Whether or not it prompts an upgrade by rating agencies should be a secondary consideration.

"Moody's has upgraded the government of India's local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive", the worldwide rating agency said in a release on Friday, adding that the government's wide-ranging economic and institutional reforms will improve the business climate and foster strong and sustainable growth.

This period has, moreover, seen the country grow from a barely $ 620 billion to a $ 2.3 trillion economy, with its official foreign exchange reserves, too, soaring from some $ 110 billion to nearly $ 400 billion. "The cost of foreign borrowings will automatically come down, which in itself is a big benefit for the country".

New Delhi- The ruling BJP and the government on Friday cheered U.S. credit ratings agency Moody's upgradation of India's sovereign ratings, with party President Amit Shah and several ministers tweeting that it was a recognition of all the good work done by the NDA. "In the economic survey presented earlier this year, the government criticised ratings agencies for not giving India an upgrade". Some of the gains were clipped later in the day.

Moody's Upgrades India's Ratings; Amit Shah Pats Modi's Back
Moody boost for Modi: India's sovereign bond rating raised

India's economic growth had slipped to an over three-year low of 5.7 per cent in the first quarter.

Can Moody's India upgrade be considered an endorsement of PM Modi's economic reorganization?

"The intent of Modi government is to continue with its reform agenda", he said. Add to these the revenue uncertainties from implementation of the goods and services tax (GST) - compounded by last Friday's decision to drastically prune the number of items attracting the top 28 per cent rate - and it has made the foreign exchange and bond markets edgy of late.

In a statement on Moody's rating, Sumeer Chandra, Managing Director of HP Inc India said the upgrade is a big boost for India, as it will improve sentiments around ease of doing business within local and global investors.

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