Mumbai: The equity markets soared higher on Friday after Moody’s upgraded India’s sovereign outlook to stable which is likely to attract more foreign fund flows and also help Indian corporates to raise funds from the overseas market at a lower cost.
The decision triggered fresh buying in the shares of public as well as private sector banks that led to a sharp surge in Nifty and Sensex.
The Nifty opened the day with a huge upward gap of 110 points at 10,324.55 and hit an intraday high of 10,343.60. However, the index could not maintain its positive momentum amidst profit booking and ended the day at 10,283.60, up 68.85 points or 0.67 per cent.
Meanwhile, the Bank Nifty hit an all time high of 25,924.90 in the intra-day trade before ending the day at 25,728.40. The 30-share Sensex gained 235.98 points or 0.71 per cent to close the day at 33,342.80.
“At a time when the markets were facing rising concerns emanating from inflationary pressures, crude prices and fiscal numbers, this unanticipated move would bring a big relief to the overall markets and investor sentiments. Bond yields will cool off a little bit as well as the rupee should see some strength over the next few days. While it is difficult to measure the net impact on foreign exchange flows as well as bond yields, however, ratings upgrade by even one agency sends out a strong signal globally and can lead to upgrades by other agencies as well,” said Saurabh S Jain, MD, SSJ Finance & Securities.
According to the provisional data, FPIs bought stocks worth Rs 1,276.62 crore.
Stating that the change in rating should reverse the negative sentiment in the bond markets for the time being, Arvind Chari, head of fixed income at Quantum Advisors said he does not expect a lot of foreign flows as bond limits to invest remains almost fully utilised and equities continue to remain over-valued.
“Given the evident pressures on the fiscal front and the likelihood that the government may not even meet this year’s and next year’s fiscal target, the rating upgrade seems to have come at a wrong time. Markets should worry that the government now having received the rating upgrade, may actually slacken and relax its commitment to reducing fiscal deficit, as per the stated plan,” he added.
