FxWirePro: Indian Nifty buoyed by Moody’s rating upgrade

Moody’s rating agency upgraded India’s sovereign rating citing economic reforms such as the introduction of Goods and Services Tax (GST) and demonetization and on expectations that such reforms would continue under the Bharatiya Janata Party (BJP) government led by Prime Minister Narendra Modi and finance minister Arun Jaitley.

Moody’s agency said in a statement, “continued progress on economic and institutional reforms will, over time, enhance India’s high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term….. The relatively fast pace of growth in incomes will continue to bolster the economy’s shock absorption capacity……And even in periods of relatively slower growth, as seen recently, stable financing will mitigate the risk of a sharp deterioration in fiscal metrics.” The rating was upgraded from Baa3 to Baa2. This is the first rating upgrade awarded to India by the agency since 2004.

The Indian benchmark stock index, Nifty 50 reacted positively on the news. The benchmark is up close to 1 percent and currently trading at 10,313. It traded as high as 10,343. Calculations at FxWirePro shows that the index could rise another 20 percent by next year or so.

Indian Rupee too moved higher on the news; it is up 0.6 percent and is currently trading at 64.9 per dollar. We expect the pair (USD/INR) to find support around 64.2 area.