Indian stocks surge on Moody's first upgrade in 14 years

Javier Stokes
November 18, 2017

Noting that India is poised to climb to the 7.5 growth path, Shah stated that the Modi government has carried out economic reforms on all levels.

Moody's said that the recent announcements of a comprehensive recapitalisation of Public Sector Banks (PSBs) and signs of proactive steps towards a resolution of high NPLs through use of the Bankruptcy and Insolvency Act 2016 are beginning to address a key weakness in India's sovereign credit profile.

The four institutions with revised rating are Export-Import Bank of India (EXIM India), HDFC Bank, Indian Railway Finance Corporation Limited (IRFC) and State Bank of India (SBI), Moody's said in a statement.

The unit rose as high as 64.62 per dollar, the highest in about two weeks, but ended half a point higher at 65.01 a dollar. "While a number of reforms remain at the design phase, Moody's believes that those implemented to date will advance the government's objective of improving business climate, enhancing productivity, stimulating investment, and ultimately fostering strong and sustainable growth", it added.

Other global rating agencies were, however, more cautious in their outlook.

The "Baa3" rating was the lowest investment grade - just a notch above "junk" status. The second quarter's numbers would be out by the end of this month.

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Moody's expects GDP growth to moderate to 6.7 per cent in the fiscal year ending in March 2018.

"Longer term, India's growth potential is significantly higher than most other Baa-rated sovereigns", the agency said.

Moody's has upgraded India's ratings after a gap of 13 years in a report released on November 16. HDFC Chairman Deepak Parekh said, "I've always felt India's rating was far below than what it should be".

Senior Bharatiya Janata Party leader Yashwant Sinha on Friday took a dig at the Narendra Modi government said that there should be a midnight ceremony in Parliament to celebrate Moody's upgrade of India's rating.

Stressing that Moody upgrade ratings after a gap of 13 years, Shah claimed that the economy under Manmohan Singh-Sonia Gandhi rule had derailed.

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