India may lose investment-grade rating, says S&P
Source: Agencies |
June 12, 2012, Tuesday
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STANDARD & Poor's said yesterday that India could become the first of the so-called BRIC economies to lose its investment-grade status, sending the rupee and stocks lower, less than two months after cutting its rating outlook for the country.
"Slowing GDP growth and political roadblocks to economic policymaking are just some of the factors pushing up the risk that India could lose its investment-grade rating," the ratings agency said in a statement on a report dated June 8.
S&P said the new report, "Will India Be The First BRIC Fallen Angel?" gave further detail as to why India's investment-grade rating could be at risk. The report did not appear to represent a change in view since April.
India's sovereign rating is BBB-, the lowest investment grade rating, and in April S&P lowered its outlook on the rating for Asia's third-largest economy to negative from stable.
Indian stocks fell into negative territory after the S&P statement, while the rupee skidded to 55.82 to the dollar, a near one-week low, from 55.45 earlier.
The benchmark 10-year bond yield rose 2 basis points following the statement release. Traders said the bond markets were affected less because offshore investors hold a small share of the market.
"While INR and bonds moved on this S&P headline, it may not have been warranted. While the report is new, the content in itself is probably not," said Kumar Rachapudi, fixed income strategist at Barclays Capital in Singapore.
"The discussion in this report has largely been covered in their previous report when S&P revised outlook in April."
India recently posted annual March quarter GDP growth of 5.3 percent, its weakest in nine years and far below expectations.
"Setbacks or reversals in India's path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality," said S&P's credit analyst Joydeep Mukerji.
The BRIC economies comprise Brazil, Russia, India and China. India has the lowest S&P rating of the BRIC countries.
"Slowing GDP growth and political roadblocks to economic policymaking are just some of the factors pushing up the risk that India could lose its investment-grade rating," the ratings agency said in a statement on a report dated June 8.
S&P said the new report, "Will India Be The First BRIC Fallen Angel?" gave further detail as to why India's investment-grade rating could be at risk. The report did not appear to represent a change in view since April.
India's sovereign rating is BBB-, the lowest investment grade rating, and in April S&P lowered its outlook on the rating for Asia's third-largest economy to negative from stable.
Indian stocks fell into negative territory after the S&P statement, while the rupee skidded to 55.82 to the dollar, a near one-week low, from 55.45 earlier.
The benchmark 10-year bond yield rose 2 basis points following the statement release. Traders said the bond markets were affected less because offshore investors hold a small share of the market.
"While INR and bonds moved on this S&P headline, it may not have been warranted. While the report is new, the content in itself is probably not," said Kumar Rachapudi, fixed income strategist at Barclays Capital in Singapore.
"The discussion in this report has largely been covered in their previous report when S&P revised outlook in April."
India recently posted annual March quarter GDP growth of 5.3 percent, its weakest in nine years and far below expectations.
"Setbacks or reversals in India's path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality," said S&P's credit analyst Joydeep Mukerji.
The BRIC economies comprise Brazil, Russia, India and China. India has the lowest S&P rating of the BRIC countries.
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