For the markets though, the feel-good factor and prospects of more foreign inflows into stocks and rupee bonds due to the upgrade will drive focus away from the headwinds, even if temporarily. Photo: AFP
For the markets though, the feel-good factor and prospects of more foreign inflows into stocks and rupee bonds due to the upgrade will drive focus away from the headwinds, even if temporarily. Photo: AFP

India’s debt rating upgrade oddly timed, but who’s complaining?

Moody's rating upgrade decision comes when rising crude oil prices and concern over fiscal slippages is seen making matters worse for policy makers already grappling with slowing economic growth

Mumbai: For India’s battered bond and currency markets, the rating upgrade by Moody’s Investors Service seems to be just what the doctor ordered. Yet, the timing of the move is being questioned.

Moody’s decision comes when rising crude oil prices and concern over fiscal slippages is seen making matters worse for policy makers already grappling with slowing economic growth.

“The timing is a surprise given concerns regarding the fiscal metrics right now," said Sue Trinh, head of Asia foreign-exchange strategy at RBC Capital Markets in Hong Kong. “It’s a nod to strong progress in structural reforms."

For the markets though, the feel-good factor and prospects of more foreign inflows into stocks and rupee bonds due to the upgrade will drive focus away from the headwinds, even if temporarily.

The rupee surged as much as 1%, the most intraday since mid-March, to 64.67 per dollar. India’s benchmark 10-year sovereign bond yield tumbled 10 basis points to 6.96% after climbing to a 14-month high on Thursday.

As Mizuho Bank Ltd’s Vishnu Varathan said the rupee will almost certainly “celebrate this windfall" upgrade. Bond investors too, may count Moody’s move as a blessing and look to ride the rally while it lasts. Bloomberg

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