Global rating agency Moody’s move to upgrade India’s sovereign debt one notch higher in the investment grade category bodes well for large Indian corporates. The reason is not far to see. This move, albeit belated, is an endorsement of India’s economic reforms and would stimulate foreign investments into Indian equity and debt markets, say economy watchers.

So when a country’s sovereign rating goes up, global institutional investors are emboldened to “allocate” more funds to that market. This is why the Moody’s sovereign rating upgrade is beneficial for India, they said. This willy-nilly will boost the flow of portfolio flows into Indian markets.

The move is positive for stable capital inflows like FDI, foreign currency borrowings costs and for the rupee over the medium-term.

Also, large corporates, who enjoy good rating, will also benefit from lower cost of overseas borrowing. There will be more appetite for their corporate paper among global institutional investors. For instance, more Indian corporates can now expect to raise overseas funds through the Masala bonds route under better terms.

However, these benefits may not flow if one is a small and medium enterprise with low visibility of earnings.

Sunil Bharti Mittal, Founder & Chairman, Bharti Enterprises, described the Moody’s sovereign rating upgrade move as one highlighting the immense potential that India offers as a global investment destination. “It clearly shows the economy has turned the corner and poised for a big leap forward,” Mittal said. This would embolden the Government to stay true to the path of strong and transformational reforms in the coming days, he said.

Sriram Kalyanaraman, Managing Director & CEO, National Housing Bank, said the sovereign ratings upgrade shows the confidence on India and would definitely bring down cost of funds for India Inc. Any international credit rating agency upgrading the sovereign rating clearly shows the faith they have on the country's economic policies.

“This will also have an indirect positive effect on our corporates when they borrow abroad,” Kalyanaraman told BusinessLine .

Ranu Vohra, Co-founder, MD & CEO, Avendus Capital, a financial services firm, pointed out:“This is happening after a long time and symbolises a manifestation of what’s been going on the ground. It’s not one or two moves but a set of say thousand smaller improvements on the ground that have contributed.”

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