International rating agency Moody’s Investors Service has upgraded India’s local and foreign currency issuer ratings to Baa2 from Baa3. “The market was extremely bearish the last couple of days which caused the benchmark 10-year to cross 7 per cent. But as we speak the yields are down 10 basis points. This is good news for long-term bond funds,” says Dhawal Dalal, CIO- Fixed Income , Edelweiss Mutual Fund.
“The rating upgrade by Moody’s brings a positive sentiment to the market. The equity markets are reacting to the sentiment. We are hopeful of a change in interest rates in the debt markets,” says Rajat Jain, CIO, Principal Mutual Fund.
The fund managers believe that the report will help India reinforce its stance as a pro-business nation and will increase international investment into the market. However, the rating change just reverses the negative sentiment in the bond markets for the time being. “We do not expect a lot of foreign flows as bond limits to invest remain almost fully utilized and equities continue to remain over-valued. The Indian Rupee also thus will remain in the broad average range of Rs 64-67 to the US Dollar that we have seen for more than 2 years,” Arvind Chari, fund manager – fixed income, Quantum Asset Management.