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Stocks build up on Moody’s India upgrade

International rating agency Moody’s affirmation of the Narendra Modi government’s structural and fiscal reforms delivered a huge confidence-building boost to equity…

Stocks build up on Moody’s India upgrade

Representational Image (Photo: Getty Images)

International rating agency Moody’s affirmation of the Narendra Modi government’s structural and fiscal reforms delivered a huge confidence-building boost to equity market.

The announcement, analysts say, could not have been timed better because owing to mounting criticism of the government policies in recent weeks has created confusion among investors who have turned tentative buyers and sellers in a volatile market.

Bulls took instant charge of the proceedings  right at the opening bell on Friday since it was widely expected that the upgradation of India’s sovereign rating from “positive” to ” stable” is all set to trigger a sustained rally with a potential to take 30-share Sensitive Index of Bombay Stock Exchange and 50-scrip Nifty of National Stock Exchange to new record highs by end-2017.

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Bank stocks climbed fresh all time record highs with state run lenders posting spectacular gains amid hectic buying by investors.

The rally was broad-based covering all sectors as analysts predicted the country’s revised rating from Baa3 to Baa2 would bring down the cost of borrowings not only for the government but also for corporate groups who now will have easier access to global money markets.

Analysts say the momentous decision of Moody’s drastically changed the mood in Dalal Street from uncertain and shaky at the start of the week to brimming with robust optimism in the concluding session today.

Being the week’s last session, the Sensex trimmed day’s gain on account of late profit booking. From 33,520 (+414)points high it settled at 33,342.80(+235.98)points gaining 0.71 per cent. Nifty after peaking 10,343.60(+128.85)points lost ground to end 0.67 per cent high  at 10,283.60(+68.85) points.

Bank Nifty hit fresh record high intra-day but ended 1.11 per cent up at 25,728.40(+381.80)points. PSU Bank Index stood out as the best performer among all segments intra-day but came under profit booking pressure as it settled for the week at 4,068.85(+38.40)points with 0.95 per cent jump. In Sensex 22  shares advanced and nine declined. For Nifty the ratio was 28:21:1.

Moody’s vice-president William Foster , Sovereign Rating Group, said ” We believe, at this stage, after a year of review, we have seen sufficient evidence to give us greater confidence that these reforms will result ultimately in higher levels of sustainable growth going forward will create an environment for greater competitiveness and robust economic outlook despite challenges as GST .

While challenges are there, these reforms will lay foundation for higher sustainable growth that will contribute to fiscal reforms, push for revenue and expenditure side over a period of time.

Fiscal deficit might not come down but will be sustained at current levels on the back these reforms. Economic growth will moderate to 6.7 per cent in Fy 18 but as disruption fades, assisted by recent government measures to support SMEs ( small and medium enterprises) and exporters with GST compliance real GDP will rise to 7.5 per cent in FY 18 with long-term robust growth by FY19 and FY20 and onwards.”

Ace investor Rakesh Jhunjhunwala, partner in Rare Enterprises, said Moody’s upgrade did not come as a surprise ” but it could be so to those who were criticising the Modi government’s efforts to revive the economy.”

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