Moody’s Upgrades India Rating After 14 Years Betting !

New Delhi: Moody’s Investors Service raised India’s sovereign rating for the first time since 2004, overlooking a haze of short-term economic uncertainties to bet on the nation’s prospects from a raft of policy changes by Prime Minister Narendra Modi.

The rupee, bonds and stocks rallied after the ratings firm upgraded India to Baa2 from Baa3 and said reforms being pushed through by PM Modi’s government will help stabilize rising levels of debt. That’s a one-level shift from the lowest investment-grade ranking and puts India in line with the Philippines and Italy.”This is an overdue correction,” PM Modi’s Chief Economic Adviser Arvind Subramanian told Bloomberg Quint, referring to the upgrade.

“This is a recognition of India’s macro economic reforms. But it has also to be kept in mind that these are external factors. And the government will pursue its own reform agenda. And those will drive our economic development.”Some investors termed it a surprise given that India recently surrendered its status as the world’s fastest-growing major economy amid sweeping policy change.

The upgrade could prove to be a big win for ruling party BJP, which has faced increasing attacks about the economic slowdown before key elections in PM Modi’s home state Gujarat next month.”This is a positive surprise to the markets, especially in terms of timing,” said Vivek Rajpal, a rates strategist at Nomura Holdings Inc. in Singapore.

“One fear that was developing in the market was debt-flow positioning.”The rupee surged as much as 1 percent to 64.67 per dollar in Mumbai while the yield on the 10-year sovereign bond tumbled 11 basis points to 6.96 percent and the benchmark equity index rose 1.25 percent. Markets have welcomed the move, with the Sensex rising over 400 points on Friday morning at 33,520 and the Nifty gaining 120 points.

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