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Global endorsements shot in the arm for the bulls on Dalal Street

Experts believe these global appreciations will help bring down the cost of borrowing for India Inc.

, ETMarkets.com|
Last Updated: Nov 17, 2017, 12.53 PM IST
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On Friday, benchmark equity index BSE Sensex surged over 400 points in early trade, while Nifty reclaimed 10,300-mark.
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On Friday, benchmark equity index BSE Sensex surged over 400 points in early trade, while Nifty reclaimed 10,300-mark. ​
Moody’s sovereign rating upgrade for India came 17 days after the World’s Bank had placed the country among top 100 nations in ‘Ease of Doing Business’ ranking.

Market experts believe these global appreciations will help bring down the cost of borrowing for India Inc and enhance investor confidence in the economy.

International rating agency Moody’s Investors Service on Thursday upgraded India’s local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive.

The long overdue sovereign rating upgrade for India is an endorsement of institutional and structural transformations ushered in by the government in the last few years while maintaining fiscal prudence, said Rana Kapoor, MD and CEO, YES Bank.

This was earlier vindicated by the sharp rise in India’s Ease of Doing Business ranking. Such global ratifications will lower the cost of borrowing and boost investor confidence and conviction in the economy, he said.

SBI Chairman Rajnish Kumar believes borrowing costs of corporates should come down. “The rating upgrade gives thumbs up to the government’s prudence with reform,” he said.

India, which was ranked 142nd in terms of Ease of Doing Business when the Narendra Modi government took office in 2014 and 130th last year, is the only large country this year to have achieved such a significant shift on the back of reforms in taxation, construction permits, investor protection and bankruptcy resolution.

This year, India climbed 30 places to rank 100th in the World Bank ranking.

Both announcements boosted investor’s confidence in the domestic equity market. Investors had expects the market to rise after India climbed in the World Bank’s ‘ease of doing business’ ranking.

On Friday, benchmark equity index BSE Sensex surged over 400 points in early trade, while Nifty reclaimed 10,300-mark.

“The bull market is going to remain here for a long, long, long, long time,” Big Bull Rakesh Jhunjhunwala told ETNow.

“I think markets tend to move much ahead of these rating upgrades and downgrades. Lot of good news tends to get priced in. This is good news, because India needs to develop a corporate bond market and this will go a long way to help global funds to put money into India’s corporate debt. You need more money for corporate bonds for long term funding and this will clearly help in that direction,” said Indranil Sengupta, chief economist, Bank of America-Merrill Lynch.

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