Moody's upgrade India outlook: Here's what experts say

Rupa Rege Nitsure, Group Chief Economist, L&T Financial Services

I think I would rather say that it will ease the terms of borrowing for the overall economy because these are very highly sentiment-driven markets and you have your experts to give comments on that but I feel it is definitely a positive move. I look at it as a thumbs up given by the rating agency to the recent structural measures, which government has taken in the last fortnight of March, which in my opinion are path-breaking.

Taimur Baig of Deutsche Bank

I think there was some gathering of momentum for a while if you look at the rationale behind the improvement in the outlook, you could argue that this has been in place for almost a year now in terms of improving inflation trajectory and lowering current account deficit. I suppose the improvements have sort of gathered momentum and the improvement on those particular two areas have seen lasting but it is also a very perspective statement in the sense that everything is forward looking -- the tangible improvement has been modest but much more can be expected if the current trajectory of the reform is continued.

Ananth Narayan of Standard Chartered Bank

I guess it is a medium-term positive for all asset classes. While we can argue about whether the immediate flows will come or not, the reality is investors whether they are real investors or whether they are financial investors, do allocate limits to countries depending upon the rating. To that extent, their appetite to invest into India and India-related assets will go up. Likewise a lot of corporate debt ratings are feeling that is the country ratings. So particularly the better-rated corporates and banks, financial institutions will see a lot more of appetite coming in from global investors.

We will see flows coming into the country across asset classes and that should be good news for the rupee, for money markets and for fixed income markets.

Jahangir Aziz of JPMorgan

It is indeed a great move and positive for India. The fact that they were the first of the three rating agencies to move from stable to positive means others too may start improving their outlook. So clearly, this is a good day and shows the impact of all the efforts that was done since 2013 near crisis that we had.

I don’t think that differentials will change either for equity investors or fixed income investors. Fixed income investors these days matter more than equity investors given the sizes of their inflows. I think it will give them more comfort of going long India but I don’t think that per se changes very much, it doesn’t trigger a new round of automatic increases in allocations.

Geoffrey Dennis of UBS

This is positive news. As we know very well there have been a lot of flows coming into India, particularly into the equity markets which is of course what I focus on, so I think you may well get more flows coming in. However, I think to a certain extent some sort of improvement in the ratings outlook is something we should be anticipating for India anyway given what is going on in terms of -up in the growth story potentially, the drop in interest rates and inflation and therefore the improvement in that side of macro story and of course to an extent, the promise of what the structural reforms that Modi’s government would generate for India down the road.

So I would expect a positive reaction, I wouldn’t expect it to lead to an explosive rally from here because the Indian market has done so well anyway and of course a lot of the international emerging market investors whom I speak to are pretty overweight India anyway.