Rating agency Moody’s Investor Services has upgraded India’s short-term foreign currency rating from speculative to investment grade.
“There has been another upgrade by Moody’s with the short-term country ceiling on foreign currency bank deposit increasing from NP (not prime) to Prime (P-3), suggesting acceptable ability to repay short-term obligations,” the finance ministry said on Tuesday.
‘Prime’ falls under the investment grade, while ‘not prime’ is a speculative grade.
The government had sought a clarification from Moody’s on the rating.
The latest upgrade comes less than a month after Moody’s upgraded the credit rating of Indian government’s bonds from speculative to investment grade, a move that was expected to encourage FIIs to increase their exposure in gilts and help companies raise funds from abroad at competitive rates.
The street sees this as good news.
“This will improve flows from foreign institutional investors and flows from non-resident Indians will also accelerate,” said Mohan Shenoi, head of treasury, Kotak Mahindra Bank.
Foreign flows, in turn, are seen helping the rupee to appreciate.
The local currency ended at 51.71 against the dollar on Tuesday, against its previous close of 52.52.
Shenoi, however, does not see it breaching the 51 mark in the near term.
According to J Moses Harding, executive vice president, IndusInd Bank, negative sentiment is out of the way now, though weak fundamentals remain a concern.
Harding sees the rupee trading in 51-53 range against the dollar till fresh cues come in.
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