Fitch Ratings concerns on Re: How are mkts reacting?

By Latha Venkatesh, CNBC-TV18

Last week CNBC-TV18, spoke to S&P and how they were looking at India very cautiously, given the macro economic fundamentals and the inflationary environment. Right now, Fitch Ratings has come out and has expressed its concern on the current account deficit and has given out a negative rating on the rupee.

I have not spoken to the market participants just yet but when I spoke to them after S&P raised those fears without changing the outlook on Indian rating, the perception in the market was that we have enough domestic problems of our own and this is too small an issue for the market to even consider a ripple in the forex or in the bond markets. Right now in the forex market the dollar became expensive by 1-2 paise after this news hit the wires and bond prices fell by about 10-15 paise. So it was not a very big difference at this point in time.

One has to really look at how Indian issuers who have foreign bonds like ICICI Bank or Tata Steel or a BHEL - those are the companies that have foreign bonds; we have to see really how they are priced. But at this point in time I have not got any rates on how they may be traded now that this news has come. It will take a while, they are not extremely liquid bonds probably in a couple of hours when London starts trading, we will get an idea of whether there has been an impact at all. But largely the market believes that this is not something that is too serious because the domestic factors are huge. They are really watching out for July 22 and where the trust vote will go. That is the basic thing which the currency markets are watching out for now. In the presence of that kind of an event this one is at the moment not creating a ripple at all in the forex market.