Moody's ups ratings of SBI, HDFC Bank, EXIM India and IRFC

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Along with that, Moody's Investors Service also upgraded nine state-owned companies including ONGC, IOC, HPCL, NTPC and GAIL and four financial institutions including SBI and HDFC and EXIM Bank.

The rating agency simultaneously upgraded India's local and foreign currency issuer rating to Baa2 from Baa3. "It is a belated recognition of the positive steps taken in the past few years".

Expressing delight on this news, India's Finance Minister Arun Jaitley has clearly stated that those who doubted GST and demonetization should get some perspective now.

A sovereign ratings upgrade of the Indian government's bonds and of some domestic industry majors from USA credit rating agency Moody's on Friday lifted the key Indian equity indices to their new intra-day record highs. The markets cheered the move.

Meanwhile the Sensex closed 236 points higher after the Moody's upgrade, while the NSE index rose almost 70 points. The Nifty 50 touched a new intra-day high of 10,343.60 points.

The unit rose as high as 64.62 per dollar, the highest in about two weeks, but ended half a point higher at 65.01 a dollar.

Revenue Secretary Hasmukh Adhia said, "The path that Government has chosen for long term reforms and fiscal consolidation is well recognised by investors already.The rating agency too has now confirmed it formally, which is welcome".

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Sinha advised the government to avoid focussing too much on ratings on World Bank (ease of doing business) and Moody's and rather focus on dealing with the issue of non-performing assets in the banking sector, jobless growth and lack of demand in the Indian economy. Now, all eyes will be on other rating agencies - S&P and Fitch Ratings - will follow Moody's lead.

Moody's upgrade, its first since January 2004, moves India's rating to the second lowest level of investment grade.

Even if recent economic reforms have seen near-term negative growth impacts, there have been some benefits. The second quarter's numbers would be out by the end of this month.

According to the agency, India's real GDP growth will come down to 6.7 percent in the fiscal year ending in March 2018, from 7.1 per cent a year earlier.

On the other hand, top bankers said the upgrade is good for the markets as capital flows into the country - which were already at a high level before the upgrade - will get a leg-up as a large part of worldwide capital allocations is rating linked.

The Rupee which was on a roller-coaster ride this year due to many adverse developments such as the expected Federal Reserve tightening of rates and a possible surge in India's current account deficit due to a surge in oil prices.